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The Short-Term Ratio of Self-Financing of Tax Cuts: An Estimate for Norway’s 2006 Tax Reform

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  • Thoresen, Thor O.
  • Aasness, Jørgen
  • Jia, Zhiyang

Abstract

This article discusses revenue estimating procedures for changes to the personal income tax. Using partial equilibrium revenue estimates of the personal income tax cuts introduced in Norway in 2006 as an example, we find wide variation in the estimates of the revenue costs of cuts depending on various factors, even in the short term. Our revenue estimates take into account labor supply responses and changes in revenues from payroll taxes and indirect taxes, and we compare our results to those obtained using current static revenue estimating procedures. In general, we find that more than 60 percent of the static revenue cost of personal income tax cuts is offset with higher tax revenues from other tax bases and higher personal income taxes due to increases in labor supply.

Suggested Citation

  • Thoresen, Thor O. & Aasness, Jørgen & Jia, Zhiyang, 2010. "The Short-Term Ratio of Self-Financing of Tax Cuts: An Estimate for Norway’s 2006 Tax Reform," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(1), pages 93-120, March.
    • Handle: RePEc:ntj:journl:v:63:y:2010:i:1:p:93-120
    DOI: 10.17310/ntj.2010.1.04
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    Cited by:

    1. John K. Dagsvik & Zhiyang Jia & Tom Kornstad & Thor O. Thoresen, 2014. "Theoretical And Practical Arguments For Modeling Labor Supply As A Choice Among Latent Jobs," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 134-151, February.
    2. Vidar Christiansen & Zhiyang Jia & Thor O. Thoresen, 2022. "Assessing income tax perturbations," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(2), pages 472-504, April.
    3. Thor O. Thoresen & Zhiyang Jia & Peter J. Lambert, 2016. "Is there More Redistribution Now? A Review of Methods for Evaluating Tax Redistributional Effects," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 72(3), pages 302-333, September.

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