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 methods are near proportional, on common.
(iii) There may be substantial heterogeneity in tax ranges and tax progressivity throughout states.
(iv) States which can be funded principally by gross sales and property taxes are inclined to have regressive tax methods and low common tax charges. States which can be funded principally by earnings taxes are inclined to have progressive tax methods and excessive common tax charges.
(v) Regressive states are concentrated within the South and entice extra inter-state internet migration, particularly of high-income migrants.
(vi) State progressivity has remained broadly steady 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 providers as a switch has a big optimistic affect on measured progressivity.
Which states have probably the most progressive tax system? Alaska, Minnesota, DC, California and New Mexico prime the record.
Which states have probably 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. Nevertheless, 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 finances than does Texas. Conversely, gross sales, excise and property taxes are regressive in each states, however Texas depends way more on these funding mechanisms. As a consequence of a mix of those funding mechanisms, total Texas has a extremely regressive tax system whereas California’s is very progressive.
Way more fascinating element could be discovered within the full paper right here.