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? Using the full income tax parameters for all U.S. states from 1977-2002, I create a "simulated tax redistribution index" that captures the mechanical impact of changes in tax policy on the Gini coefficient, but is exogenous to any behavioral response. Analyzing the effect of this redistribution index on inequality, I find that gross wages do not adjust so as to undo the effect of changes in state income taxes. On aggregate, more redistributive state taxes do not substantially affect interstate migration, nor do they ...
<0 and [beta]><2, the index places more weight on the top of the distribution, while for><0 are that states with more redistributive taxes use the additional revenue to create jobs for low-skilled workers, or that the inflow of low-skill workers leads to the formation of a union which raises the wages of all low-skilled workers. A possible explanation for [beta]>