A Model of the Distributional Incidence of State and Local Taxes

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Abstract
This article estimates a model to explain differences across states in the distributional incidence of state and local tax systems. The model emphasizes the role of distributional conflict in modifying the tax structure incentives resulting from changes in relative prices. The model is tested using 1985 data on states. The major finding is that deductibility has a positive effect on the progressivity of state and local tax systems and that the effect is strong enough to imply a progressive impact of deductibility on the combined federal-state-local tax system. Tastes for redistri bution as measured by political liberalism and welfare benefit levels, rather than the strength of particular interest groups or the composition of expenditures, are the other major factors explaining differences in progressivity.

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