STATE REVENUE EXTRACTION FROM DIFFERENT INCOME GROUPS - VARIATIONS INTAX PROGRESSIVITY IN THE UNITED-STATES, 1916 TO 1986

We examine the conditions that affected the progressivity of the indiv idual income tax in the United States between 1916 and 1986. A multiva riate time-series analysis shows how macroeconomic conditions, state i mperatives, the organizational capacities of social classes, and polit ical conditions have affected the progressivity and the symbolic compo nent of the income tax. Progressivity is measured by the difference be tween the effective tax rates paid by moderate income and very high in come families. The symbolic component of this tax is measured by the d ifference between the nominal tax rate and effective income tax rate p aid by very high income families. The results reveal that changes in t ax progressivity are due largely to macroeconomic and state fiscal con ditions, such as unemployment, economic development, and budget defici ts, although the organizational capacities of social classes and polit ical conditions, such as labor organization and political participatio n, also have effects. Changes in progressivity are due primarily to ad justments in the rates paid by very high income families. However the impacts of these conditions on tax progressivity changed somewhat when the federal income tax was transformed into a mass tax during World W ar II. Finally, political conditions have a relatively greater effect on the symbolic component of the income tax than on progressivity. Ove rall, this analysis supports a structural theory of the state in which the influences of politics and social classes on revenue extraction a re circumscribed by macroeconomic and state fiscal conditions.