Taxing Top Wealth: Migration Responses and their Aggregate Economic Implications

Do wealth taxes lead to a harmful exodus of wealthy taxpayers? Using administrative data on wealth, firm ownership structure, and migration in Sweden and Denmark, we estimate international migration responses to wealth taxation and evaluate the aggregate economic implications of tax-induced migration. Exploiting three large reforms, we find significant migration responses to wealth taxes among the wealthy. We then investigate individual-level, firm-level, and market-level effects of these migration responses. A large fraction of wealthy taxpayers are business owners, and the employment, investments, and value-added of these businesses are negatively affected by owner out-migration. Nevertheless, the aggregate consequences of these effects are modest. We estimate that migration responses to a 1pp increase in the top wealth tax rate decrease the stock of wealthy taxpayers by less than 2% in the long run, and lead to a reduction of 0.05% in aggregate employment, 0.07% in aggregate investment, and 0.13% in aggregate value-added. Hence, our results demonstrate that trickle-down effects of tax-induced migration by the wealthy do exist, but that they are quantitatively small.