Lessons on State and Local Income Taxes From the Twenty‐First Century and Challenges for the Future

Abstract I survey recent research on subnational income tax policy, arguing that a defining feature is geography. Geographic boundaries limit the power of subnational governments to tax people and activities. The article discusses where income should be taxed and the effects of these tax rules on the interjurisdictional mobility of people and jobs. I examine how mobility can heighten tax competition and limit the ability of subnational governments to engage in redistribution. I discuss how telework will influence the income tax by decoupling the locations of the employee and employer. Important areas for future research for the coming decades are highlighted.