Those are the questions a NBER Working Document, Heathcote, Storesletten and Violante Its objective is to respond. Using a variety of survey and administrative data, the authors reach the following 8 conclusions:
(i) The federal tax and transfers system is progressive.
(ii) State and local tax systems and transfers are close to proportional, on average.
(iii) There is substantial heterogeneity at fiscal levels and fiscal progressivity between states.
(iv) states that are mainly financed by sales and property taxes tend to have regressive tax systems and low average tax rates. The statements funded mainly by income taxes tend to have progressive tax systems and high average tax rates.
(v) The regressive states are concentrated in the south and attract more interstate net migration, especially high -income migrants.
(VI) The progressivity of the State has remained widely stable between 2005 and 2016.
(VII) The incorporation of corporate income and commercial taxes decreases the progressivity of the average state, but federal progressivity increases.
(VIII) Include spending on public goods and services as a transfer has a great positive impact on measured progressivity.
What states have the most progressive fiscal system? Alaska, Minnesota, DC, California and New Mexico lead the list.
What states have the most regressive fiscal system? Illinois, Nevada, New Hampshire, Tennessee and Texas.
Progressiveness is clearly illustrated by comparing California and Texas. Both states have a progressive income tax. However, the Income Tax constitutes a much greater participation in the funds in California than in Texas and the California Tax Code is much more progressive. State transfers are also progressive in both states, but California has much larger transfers as part of its budget than Texas. On the contrary, sales, special taxes and property taxes are regressive in both states, but Texas is based much more on these financing mechanisms. Due to a combination of these financing mechanisms, Texas in general has a highly regressive tax system, while California is very progressive.
You can find much more interesting details in complete paper here.
