That’s the questions an NBER working paper by Fleck, Heathcote, Storesletten, and Violante goals to reply. Utilizing quite a lot of survey and administrative information, the authors attain the next 8 conclusions:
(i) The federal tax and switch system is progressive.
(ii) State and native tax and switch techniques are near proportional, on common.
(iii) There’s substantial heterogeneity in tax ranges and tax progressivity throughout states.
(iv) States which are funded largely by gross sales and property taxes are likely to have regressive tax techniques and low common tax charges. States which are funded largely by earnings taxes are likely to have progressive tax techniques and excessive common tax charges.
(v) Regressive states are concentrated within the South and appeal to extra inter-state web migration, particularly of high-income migrants.
(vi) State progressivity has remained broadly secure between 2005 and 2016.
(vii) Incorporating company earnings and enterprise taxes decreases common state progressivity however will increase federal progressivity.
(viii) Together with spending on public items and companies as a switch has a big optimistic impression on measured progressivity.
Which states have essentially the most progressive tax system? Alaska, Minnesota, DC, California and New Mexico high the record.
Which states have essentially the most regressive tax system? Illinois, Nevada, New Hampshire, Tennessee and Texas lead.
Progressivity is clearly illustrated by evaluating California and Texas. Each states have a progressive earnings tax. Nonetheless, earnings tax makes up a a lot bigger share of funding in California than Texas and the California tax code is way more progressive. State transfers are additionally progressive in each states, however California has a lot bigger transfers as a share of its price range than does Texas. Conversely, gross sales, excise and property taxes are regressive in each states, however Texas depends way more on these funding mechanisms. Resulting from a mix of those funding mechanisms, general Texas has a extremely regressive tax system whereas California’s is extremely progressive.
Far more fascinating element may be discovered within the full paper right here.
