This article examines the factors that influence two important areas of state tax policy—the adoption of an income tax as well as whether a state permits deducting federal income taxes against state individual income taxes. We focus on a factor that has largely been unexplored, the flow of income going to the Top 1% of earners. Using data from two different time periods (1916-1937 and 1960-2003), we find that the share of income received by the richest 1% of taxpayers corresponds with both the likelihood states will adopt an income tax as well as whether states allow deductions of federal income tax against state individual income taxes.