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Tax Rate Changes and the Specification of the Tax Equation

Author

Listed:
  • James A. Richardson

    (Louisiana State University, Baton Rouge)

  • Loren C. Scott

    (Louisiana State University, Baton Rouge)

Abstract

Various methods have been used to incorporate tax rate changes into the tax equation. Some economists, building on the early work by Groves and Kahn, convert all tax data to reflect the same tax rate and tax base before estimating a tax equation, while, more recently, Singer and others have used additive dummy variables in allowing for tax rate changes. In this paper a theoretical model showing that changes in tax rates affect both the slope and the intercept of the tax equation is developed. Empirical work, based on the fiscal history of Louisiana, is then presented to support the implications of the theoretical model.

Suggested Citation

  • James A. Richardson & Loren C. Scott, 1979. "Tax Rate Changes and the Specification of the Tax Equation," Public Finance Review, , vol. 7(2), pages 238-247, April.
    • Handle: RePEc:sae:pubfin:v:7:y:1979:i:2:p:238-247
    DOI: 10.1177/109114217900700208
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    References listed on IDEAS

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    1. Adams, F Gerard & Brooking, Carl G & Glickman, Norman J, 1975. "On the Specification and Simulation of a Regional Econometric Model: A Model of Mississippi," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 286-298, August.
    2. Singer, Neil M, 1970. "Estimating State Income-Tax Revenues: A New Approach," The Review of Economics and Statistics, MIT Press, vol. 52(4), pages 427-433, November.
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