Wealth Taxation & Migration Patterns of the Very Wealthy

Résumé

Using administrative data on wealth, firm ownership structure and migration in Sweden and Denmark, we document international migration patterns of the very wealthy, their impact on the economy and how they are affected by wealth taxation. We show that more than 20% of taxpayers liable to the wealth tax own businesses, and that the employment, investments and value-added of these firms are negatively affected when their owner migrates out of the country. Exploiting three large reforms, we then isolate the causal effects of wealth taxation on international location choices of the wealthy, and find significant positive responses of out[1]migration flows to increases in the effective tax rate on wealth. But, most importantly, we also document that the overall levels of these migration flows were remarkably small (with annual net-migration rates inferior to .01%). As a result, we find that the aggregate economic effects of wealth tax-induced migration were surprisingly modest in Scandinavia: a one percentage point increase in the average effective tax rate on wealth for the top 2% is estimated to decrease the population of these wealthy taxpayers by at most 2% in the long run, and lead to at most a reduction of .03% in aggregate employment, or of .1% in aggregate value-added. (With Katrine JAKOBSEN, Henrik KLEVEN, Jonas KOLSRUD, Camille LANDAIS )