State Income Taxes and Military Service Members' Legal Residency Choices.

Using military residency data from 1998 to 2005 across all fifty states, I find that income taxes deter legal residencies and that the effect grows as income increases. My results indicate that states with no income tax or with exemptions for military wages experience 100 percent and 39 percent more service member residencies, respectively, than states with an income tax. The influence of state tax policy increases with higher pay and tenure. My findings are in keeping with economic theory, which suggests that high income workers will migrate out of high tax areas and be replaced by low income workers.