Do redistributive state taxes reduce inequality?

Gini for Personal

Hourly Income Dependent Variable Wages Per Capita Tax [redistribution.sub.t] -0.439 1.328

[0.870] [2.404] Tax [redistribution.sub.t-1] 0.778 3.481

[0.830] [2.3681 Tax [redistribution.sub.t-2] -0.357 2.094 *

[0.868] [1.243] Tax [redistribution.sub.t-3] -0.07 2.625 **

[0.914] [1.168] Tax [redistribution.sub.t-4] -1.613 ** -2.384

[0.710] [2.363] Tax [redistribution.sub.t-5] 0.392 2.488

[0.631] [1.903] Tax [redistribution.sub.t-6] -1.21 4.998

[0.798] [3.748] Time-varying state characteristics? Yes Yes State and year fixed effects? Yes Yes Region-specific time trend? Yes Yes Observations 1,020 1,020 R-squared 0.51 0.99 Sum of lagged redistribution -2.08 13.303

coefficients [1.042] [5.146] Sum of all redistribution coefficients -2.518 14.631

[0.8391 [6.056] Two-Tailed F-Test: HO Is That Tax Redistribution Coefficients = 0 Can We Reject the Null That the Dependent Variable Is Unaffected by ... Current taxes? No No The sum of lagged taxes? Yes Yes

[P = 0.05] [P = 0.01] The sum of current and lagged tax Yes Yes

rates? [P < 0.01] [P = 0.02] Note: Robust standard errors, clustered at the state level, in brackets. *, **, and *** denote statistical significance at the 10%, 5%, and 1 % levels, respectively. "Tax Redistribution" is the negative of the Reynolds-Smolensky index, calculated as [bar.GB] - [bar.GA] (see text for details). Time- varying state characteristics in column 1 are log real personal income per capita, the unemployment rate, the unionization rate, the sales tax rate, the maximum estate/inheritance tax rate, and an indicator for whether the state has an estate tax. In column 2, the same set of time-varying state characteristics are included, with the exception of log real personal income per capita. TABLE 6 POLITICAL ECONOMY-DOES INEQUALITY DRIVE TAX REDISTRIBUTION? Dependent Variable: Tax Redistribution Index

[1] [2] [31 Pre-tax [Gini.sub.t-1] -0.002 -0.002 -0.003

[0.002] [0.002] [0.002] Pre-tax [Gini.sub.t-2] 0.002 0.001 0.000

[0.002] [0.002] [0.002] Pre-tax [Gini.sub.t-3] 0.001 0.001

[0.002] [0.002] Pre-tax [Gini.sub.t-4] 0.004 * 0.004 *

[0.002] [0.002] Pre-tax [Gini.sub.t-5] 0.003

[0.002] Pre-tax [Gini.sub.t-6] 0.006 **

[0.003] Time-varying state Yes Yes Yes

characteristics? State and year fixed Yes Yes Yes

effects? Region-specific time Yes Yes Yes

trend? Observations 1,020 1,020 1,020 R-squared 0.94 0.94 0.94 Sum of lagged Gini 0.000 0.004 0.011

coefficients [0.003] [0.007] [0.009] Two-Tailed F-Test: HO Is That Gini Coefficients = 0 Can We Reject the Null That the Dependent Variable Is Unaffected by the Sum of Lagged Inequality Coefficients? No No No Note: Robust standard errors, clustered at the state level, in brackets. *, **, and *** denote statistical significance at the 10%, 5% and 1%, levels, respectively. "Tax Redistribution index" is the negative of the Reynolds-Smolensky index, calculated as [bar.GB] - [bar.GA] (see text for details). Time-varying state characteristics are log real personal income per capita, the unemployment rate, the unionization rate, the sales tax rate, the maximum estate/ inheritance tax rate, and an indicator for whether the state has an estate tax.