Question: Lets say you work in Chicago and live in Chicago but put your home address as somewhere in Indiana. Then every week you collect the mail that is being sent to you in Indiana. Wouldn't you save a lot of money assuming the taxes are lower? What prevents people from doing this?

Answer: 
According to [the Illinois Department of Revenue](https://www2.illinois.gov/rev/questionsandanswers/Pages/10.aspx), you must file an Illinois income tax return if “you earned enough taxable income from Illinois sources to have a tax liability[.]” There is a form for residents of Iowa, Kentucky, Michigan or Wisconsin to fill out exempting them from withholding, but not Indiana. “If you received wages, salaries, tips, and commissions from Illinois employers, you are not required to pay Illinois Income Tax on this income. This is based on reciprocal agreements between Illinois and these states.”

So this might be useful if you earn a lot of passive income from investments out-of-state (although in that case the way to make them tax-free *legally* is to buy muni bonds), or if you want to work in Indiana but live in Chicago, but not if you work and live in Illinois.

Most people who work in Illinois would have state income tax withheld, although the hypothetical tax cheat would have several ways around that.
I'm surprised no one has yet mention an important reason: **ignorance**.

Your question (and other answers) assumes people are aware of all the benefits and costs of making such decision. However, **we are not rational machines**. In reality, we have limited knowledge of the world. There is an amazing article about a recent book on the topic ("The knowledge illusion") [here](https://www.nytimes.com/2017/04/18/books/review/knowledge-illusion-steven-sloman-philip-fernbach.html). A nice quote:

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> Over the last few decades, the ideal of the rational individual has been attacked from all sides. Postcolonial and feminist thinkers challenged it as a chauvinistic Western fantasy, glorifying the autonomy and power of white men. Behavioral economists and evolutionary psychologists have demonstrated that most human decisions are based on emotional reactions and heuristic shortcuts rather than rational analysis, and that while our emotions and heuristics were perhaps suitable for dealing with the African savanna in the Stone Age, they are woefully inadequate for dealing with the urban jungle of the silicon age.
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