Agglomeration, Tax Differentials, and the Mobility of Professional Athletes
35 Pages Posted: 17 Apr 2015
There are 2 versions of this paper
Agglomeration, Tax Differentials, and the Mobility of Professional Athletes
Agglomeration, Tax Differentials, and the Mobility of Professional Athletes
Date Written: April 15, 2015
Abstract
Interstate mobility may limit states’ ability to choose their desired tax rates. The forces of agglomeration, however, may allow states more leeway in setting tax rates. Mobility and agglomeration effects, however, are not uniform for all individuals within a state, and may vary significantly across different groups. We explore this heterogeneity by examining the residential location decisions of race car drivers, who are subject to agglomeration effects, and professional golfers, who are not. Consistent with our theory, we show that the probability of residing in tax-advantaged states depends on income and age only for the group not subject to agglomeration effects. These findings highlight the need to better understand how competition and agglomeration interact when formulating tax policy.
Keywords: taxation, tax law, mobility, professional athletes, tax competition
JEL Classification: H73, H24, H2
Suggested Citation: Suggested Citation