Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy

Abstract

We contribute to the literature on the effect of taxes on the locational choices of wealthy individuals by examining the geographical sensitivity of the Forbes 400 richest Americans to state estate taxes. Though we find billionaires’ effective tax rates are only about half the statutory rate, their residential choices are highly sensitive to these taxes, as 35 percent of local billionaires leave states with an estate tax. This tax-induced mobility causes a large reduction in the aggregate tax base. Nonetheless, we find that the revenue benefit of an estate tax exceeds the cost for the vast majority of states. (JEL H24, H31, H71, R23)

Internal migration and the effective price of state and local taxes

“…Recent literature has studied the mobility response of star athletes (Kleven, Landais, and Saez, 2013), inventors (Akcigit, Baslandze, and Stantcheva, 2016), star scientists (Moretti and Wilson, 2017), and the ultra-wealthy (Moretti and Wilson, 2023), all finding large mobility responses to tax differentials. But these cases may feature particularly high cross-border mobility both because they involve little location-specific human capital and because the workers studied tend to be less tied to specific firms (Kleven et al, 2020).…”