The Efficacy of State and Local Governments' Redistributional Policies

Abstract

This article examines the relative effectiveness of the redistributive efforts of state and local governments. Specifically, we examine whether these efforts have affected both income inequality within a state and income inequality within racial groups as well as in urban/rural populations across states. To do this, we use a recently developed statistical model of comprehensive inequality to analyze the size distribution of income in the United States for the fifty states for the years 1970 and 1980. We proceed by examining the relationships of these income inequality measures to state and local tax progressivity, state and local government expenditures on education and welfare, federal tax burden, and federal expenditures. We find that states with more progressive sales and personal income taxes tend to have more inequality, while the overall state/local tax progressivity appears to contribute to reducing inequality.