Much has been made in the current presidential campaign about the way that Barack Obama’s tax plans would redistribute money among income groups. But changes in tax policy also redistribute income geographically, because states and regions have different concentrations of wealth. Obama’s tax plan might produce one of the most radical geographic redistributions of income propelled by the tax code since….well, since President Bush’s tax cuts. And, ironically, some of the biggest losers would be states where Obama has the greatest support.
To get a glimpse of how this redistribution might work, I took a look at a study done by E.J. McMahon at the Manhattan Institute’s Empire Center for Public Policy. Crunching data from the Internal Revenue Service, the Congressional Budget Office and the New York State Department of Taxation and Finance, where he was once deputy commissioner of tax policy, McMahon compares the flow of tax dollars from New York to Washington under changes in the income tax code proposed by both candidates. Other states with higher-than-average family income could expect similar patterns.