States with a higher concentration of income going to the top one percent are more likely to adopt income tax

Americans are taxed at a federal – and often state – level. But what affects whether or not states adopt taxes? In new research, Thomas Hayes and Christopher Dennis have determined that the concentration of wealth matters for state tax systems. They find that there is a positive relationship between income going to the top 1 percent and the likelihood a state will adopt an income tax, suggesting that state authorities are keen to capture the income of top earners when income becomes highly concentrated. They also find that the higher the concentration of income in a state, the more likely the state is to allow taxpayers to deduct federal income taxes from state taxes.