Agglomeration, Tax Differentials, and the Mobility of Professional Athletes

35 Pages Posted: 17 Apr 2015

See all articles by Grant Driessen

Grant Driessen

Tulane University - Department of Economics

Steven M. Sheffrin

Tulane University

Multiple version iconThere are 2 versions of this paper

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

Driessen, Grant and Sheffrin, Steven M., Agglomeration, Tax Differentials, and the Mobility of Professional Athletes (April 15, 2015). Available at SSRN: https://ssrn.com/abstract=2594832 or http://dx.doi.org/10.2139/ssrn.2594832

Grant Driessen

Tulane University - Department of Economics ( email )

New Orleans, LA 70118
United States

Steven M. Sheffrin (Contact Author)

Tulane University ( email )

New Orleans, LA 70118
United States

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