Relocation of the Rich: Migration in Response to Top Tax Rate Changes from Spanish Reforms

We quantify the importance of mobility as a response to top tax rate changes in a country where migration is relatively low. A recent Spanish tax reform granted states the authority to set income tax rates for the first time. This Spanish tax reform resulted in substantial tax differences across states for high income tax payers. To study the effect of these tax changes, we use individual-level information from Social Security records over a period of one decade. The reform increases the probability of moving. In addition, conditional on moving, taxes have a significant effect on the location choice. A one percent increase in the net of tax rate for a region increases the probability of moving to that region by 1.7 percentage points.