Can Redistributive State Taxes Reduce Inequality?

ABSTRACT Do income taxes levied at a state or regional level affect the after-tax distribution of income? Or do workers merely move between regions, causing pre-tax wages to adjust? This question is relevant both in across states in the United States, and across countries within the European Union. Using the full income tax parameters for all US states from 1977-2002, I create a “simulated tax redistribution index”, which captures the…