How State Taxes Affect Workers’ Residential Location: Evidence from a Pilot Study

• In Event: Cross-Border Shopping and Tax Induced Mobility

Abstract

Using Airmen Certification data from the Federal Aviation Administration from 2009 to 2024, this paper examines the effect of state personal income taxes on the residential location decisions of U.S. commercial airline pilots. Without the possibility of remote work, workers in most occupations are constrained by where their employers are when deciding where to live. The feasibility of commuting can mask the true effect of state taxes on workers' geographical preferences, making it challenging to study the mobility response of workers to state tax changes. Commercial airline pilots are largely an exception to this. Highly paid, able to have generous vacations, and allowed to fly to work for interstate commutes, pilots arguably “can live where they do because that is where they want to live” (Parsons 1979). I find that pilots disproportionately reside in zero- and low-income-tax states, and the estimated elasticity of mobility relative to taxes is quite sizable (around 2.9). By focusing on one occupation that is extremely mobile long before the rise of remote work, this paper aims to shed light on how state income taxes might distort location choices in the long run in a world where a larger segment of the workforce becomes more mobile due to the persistence of remote work arrangements.

Author

• Xinyu Chen, University of Michigan