Do Redistributive State Taxes Reduce Inequality?

A few years ago, I did some work on the impact of progressive taxes at the state level (in the US). There’s a theory around that high-income workers flee progressive taxes, and therefore that they have no effect on post-tax inequality (because firms are effectively compelled to raise pre-tax wages in response). My research found no such effects – suggesting that US states could safely make their taxes more progressive without the rich threatening to move interstate. I’m pleased to see that it’s had some effect on the policy debate too – a mention in a CBPP report, which has now been picked up in evidence to the US House of Reps Committee on Finance arguing in favour of more progressive taxes in Hawaii. As an academic, you get resigned to seeing work hit the dustbin, so it’s a pleasant fillup when it makes a difference.

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3 Responses to Do Redistributive State Taxes Reduce Inequality?

  1. Corin says:

    Andrew, it seems to me that you have had a major impact as an academic. I know that the Govt (of all sides) haven’t implemented your views completely on schools or on wages but you’ve certainly been a force for shifting sentiment and sentiment matters in the end. I personally reckon that Garnaut has had more impact on Australian public policy than any public servant since Coombes and whilst much of this was in the guise of a Hawke government adviser it really was a product of him having a particular view point he could defend and articulate. I’m personally not convinced that running for office will get you more influence but it certainly can get you into rooms of influence. What I am a touch surprised by is why you have decided to run for a seat rather than work say for Swan or Gillard or Rudd (as one of their two or three most key advisers). I think he hours worked may be the answer … and also whilst ideas may hit the dustbin they do get argued for … I suppose there is a trade-off. Certainly one I don’t have the answers for … I don’t know I guess it comes down to whether you like the quiet life but with a capcity to shape society (in a general sense) or the rough and tumble of the bear pit. Personally as much as I would like to like ‘real politics’, the practice of it is not for me, I’m much too nice really… I like weekends and seeing my wife too much as well.

  2. Demosthenes20XX says:

    Andrew, please don’t ever let reality and actual events get in the way of a good academic theory…

    “Taxing The Rich: Wealthy Avoid New Jersey”

    http://www.forbes.com/2010/02/04/state-estate-income-tax-migration-personal-finance-rich-avoid-new-jersey.html

    “Millionaires Flee Maryland Taxes”

    http://www.washingtonexaminer.com/local/Millionaires-flee-Maryland-taxes-46138062.html

    “Soak The Rich, Lose The Rich”

    http://online.wsj.com/article/SB124260067214828295.html

    “Do the Rich Flee from High State Taxes? Evidence from Federal Estate Tax Returns” — Univ of Michigan, Ross School of Business

    http://hdl.handle.net/2027.42/39176

  3. baz says:

    I wonder if it was picked up because the paper was lefty and Congress is full of lefties…..just a thought before we pat ourselves too much on the back.

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