International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Monday, May 4, 2015

How do tax rates affect where the world’s top inventors choose to live?

There is currently heated public debate about whether higher top tax rates will cause an exodus of valuable, high income and highly skilled economic agents.

Weforum-logoOpponents of higher taxes claim that they will unavoidably lead to a brain drain and an exodus of the most qualified people, especially as barriers to labour mobility between developed countries are reduced.  On the other hand, proponents of higher taxes maintain that migration decisions are driven by other (possibly non-economic) considerations and would not respond very much to higher taxes.

This debate has been enlivened by recent budget deficits that have forced governments to reconsider tax burdens on different income groups. ...  

Read Professor Ufuk Akcigit's complete analysis for the World Economic Forum: "The results highlight that superstar top 1% inventors are significantly affected by top tax rates when deciding where to live. For instance, our results suggest that, given a ten percentage point decrease in top tax rates, the average country would be able to retain 1% more domestic superstar inventors and attract 38% more foreign superstar inventors."

hat tip: Dr. Andrew Morriss

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