State Tax Incidence Report

Rationale

As many states have increased taxes over the past year to counter impending fiscal shortfalls, states have developed mathematical models for determining the fiscal impact of changes to the tax code. However, states are much less sophisticated in analyzing who will pay more or less in taxes as a result of the change. Only a few states have developed the capacity to determine how proposed changes in their tax laws would affect the amount of taxes owed by different income groups in their populations or how total tax obligations are distributed across income groups at a particular point in time. Only two states mandate that a distributional analysis of their tax laws, called a tax incidence study, be conducted. A multi-tax economic incidence model allows states to see the distributional effects of tax code changes across different income levels.

About Measure

States get credit for one of more of the following: 1) either developing capacity or having limited capacity for analyzing income tax impact, 2) having a multi-tax economic incidence model. A state receives 0 points if it has no capacity for such analysis, 0.5 points if it has some capacity or is developing capacity, and 1 point if it has full capacity. proposed changes

Source

Mazerov, M. (2002). Developing the capacity to analyze the distributional impact of state and local taxes. [On-line] Available: Center on Budget.