Do redistributive state taxes reduce inequality?

[P < 0.011] [P < 0.011] 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 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. Sample is restricted to inequality observations from 1983-2002. Sample size for all specifications is 1,020. TABLE 2 ROBUSTNESS CHECKS Dependent Variable: Gini Coefficient for Pre-Tax Hourly Wages

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No State Population

Characteristics Weighted Tax [redistribution.sub.t] -0.738 -1.612 *

[0.909] [0.905] Tax [redistribution.sub.t-1] 0.915 1.332

[0.824] [1.035] Tax [redistribution.sub.t-2] -0.39 0.353

[0.956] [0.803] Tax [redistribution.sub.t-3] -0.206 -0.021

[0.922] [0.820] Tax [redistribution.sub.t-4] -1.611 ** -1.594 *

[0.759] [0.809] Tax [redistribution.sub.t-5] 0.32 -0.402

[0.639] [0.631] Tax [redistribution.sub.t-6] -0.89 -0.687

[0.821] [0.635] Time-varying state

characteristics? No Yes State effects? Fixed Fixed Year fixed effects? Yes Yes Region-specific time trend? Yes Yes R-squared 0.60 0.76 Hausman test HO: RE is consistent Sum of lagged redistribution

coefficients -1.862 -1.02

[1.146] [1.094] Sum of all redistribution

coefficients -2.6 -2.632

[0.796] [0.844] One-Tailed F-test: HO Is That Tax Redistribution Coefficients [less than or equal to] 0 Can We Reject the Null That Pre-Tax Inequality Is Unaffected by ... Current taxes? No No The sum of lagged taxes? -- No The sum of current and

lagged tax rates? No No One-Tailed F-Test: HO Is That Tax Redistribution Coefficients [less than or equal to] 1 Can We Reject the Null That Pre-Tax Inequality Fully Adjusts in Response to ... Current taxes? Yes Yes

[P = 0.03] [P < 0.01 The sum of lagged taxes? Yes Yes

[P = 0.01] [P = 0.04] The sum of current and

lagged tax rates? Yes Yes

[P < 0.01] [P < 0.01]

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No State Random State

Effects Effects Tax [redistribution.sub.t] 0.234 -0.053

[1.152] [0.884] Tax [redistribution.sub.t-1] 1.038 1.021

[0.840] [0.817] Tax [redistribution.sub.t-2] 0.125 -0.1

[0.982] [0.916] Tax [redistribution.sub.t-3] -0.32 -0.19

[1.023] [0.943] Tax [redistribution.sub.t-4] -1.142 -1.410 *

[0.795] [0.745] Tax [redistribution.sub.t-5] 0.612 0.399

[0.688] [0.673] Tax [redistribution.sub.t-6] -0.47 -0.694

[0.869] [0.792] Time-varying state

characteristics? Yes Yes State effects? None Random Year fixed effects? Yes Yes Region-specific time trend? Yes Yes R-squared 0.37 0.44 Hausman test 1183.593 H0: RE is consistent P < 0.01 Sum of lagged redistribution

coefficients -0.157 -0.974

[1.129] [0.987] Sum of all redistribution

coefficients 0.077 -1.027

[0.560] [0.568] One-Tailed F-test: H0 Is That Tax Redistribution Coefficients [greater than or equal to] 0 Can We Reject the Null That Pre-Tax Inequality Is Unaffected by ... Current taxes? No No The sum of lagged taxes? No No The sum of current and

lagged tax rates? No No One-Tailed F-Test: HO Is That Tax Redistribution Coefficients [less than or equal to] 1 Can We Reject the Null That Pre-Tax Inequality Fully Adjusts in Response to ... Current taxes? No No The sum of lagged taxes? No Yes

[P = 0.021 The sum of current and

lagged tax rates? Yes Yes

[P = 0.05] [P < 0.01] 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 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. Sample is restricted to inequality observations from 1983-2002. Sample size for all specifications is 1,020. TABLE 3 HOW DO REDISTRIBUTIVE TAXES AFFECT THE TOP AND BOTTOM OF THE INCOME DISTRIBUTION? Dependent Variable: S-Gini Coefficient for Pre-Tax Hourly Wages

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[delta] = 1.25 [delta] = 1.5

More Weight on Top of

Distribution Than Gini Tax (redistribution.sub.t] -0.895 -0.672

[1.024] [0.924] Tax (redistribution.sub.t-1] 1.004 0.98

[0.838] [0.816] Tax (redistribution.sub.t-2] -0.556 -0.439

[1.043] [0.981] Tax (redistribution.sub.t-3] 0.278 0.064

[0.984] [0.941] Tax (redistribution.sub.t-4] -1.000 -1.288

[0.828] [0.779] Tax (redistribution.sub.t-5] 0.251 0.27

[0.715] [0.682] Tax (redistribution.sub.t-6] -0.821 -0.963

[0.856] [0.839] Time-varying state characteristics? Yes Yes State and year fixed effects? Yes Yes Region-specific time trend? Yes Yes R-squared 0.65 0.63 Sum of lagged redistribution

coefficients -0.845 -1.377

[1.138] [1.113] Sum of all redistribution

coefficients -1.739 -2.049

[0.980] [0.946] One-Tailed F-test: HO Is That Tax Redistribution Coefficients [less than or equal to] 0 Can We Reject the Null That Pre-Tax Inequality Is Unaffected by ... Current taxes? No No The sum of lagged taxes? No No The sum of current and lagged