Full Citation

Title: State Tax Differentials, Cross-Border Commuting, and Commuting Times in Multi-State Metropolitan Areas

Citation Type: Miscellaneous

Publication Year: 2013

ISBN:

ISSN:

DOI:

NSFID:

PMCID:

PMID:

Abstract: This paper examines the e ffect of income tax diff erentials on commuting times within MSAs that straddle state borders. We demonstrate that theoretically commuting costs are larger in the low-tax side of the interstate MSA than in the high-tax side. An increase in the average income tax rate in only one part of the MSA will result in out-migration to the other portion of the MSA, which contracts the boundary of the MSA in the high-tax state and expands the boundary of the MSA in the low-tax state. This eff ect contrasts with standard monocentric city models in the presence of taxes, where tax policy within the MSA is uniform and the eff ect of taxes arises because of di fferences in the marginal tax rates. Using micro-data from the American Community Survey (ACS) and TAXSIM, we determine the tax rate of a sample of urban households and we determine what their counter-factual tax rate would be had they resided in the other state of their MSA. Exploiting tax discontinuities resulting from the state border, we are able to show that commute times are one minute longer(5% of the average commute) on the side of the MSA with the higher average tax rate. We identify large eff ects for a$ffluent households and for households that recently moved into the MSA, for whom tax differentials are most salient. We also show empirically that increases in marginal tax rates, relative to the neighboring state, will lower the implicit value of time and results in a more sprawling city on the high marginal tax rate side of the border.

User Submitted?: No

Authors: Hoyt, William H.; Agrawal, David R.

Publisher: University of Georgia

Data Collections: IPUMS USA

Topics: Other

Countries: