Tax Projections and the Budget: Lessons from the 1980s
AbstractSome economists have argued that the disincentive effects of marginal tax rate increases in the 1980s caused revenue to rise by less than had been anticipated. To evaluate the hypothesis, this paper considers OMB revenue forecasts and forecast errors for the period 1982-93. If the revenue gains from tax increases, and the revenue losses from tax cuts, were overstated because of inadequate allowance for behavioral responses, then the forecast errors should be negatively related to the initial revenue estimates of the impact of policy changes. For excise taxes and corporate income taxes, the results suggest that the systematic overprediction of revenues during the period can be explained in part by an underestimate of behavioral responses to taxation.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5009.
Date of creation: Jun 1995
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Other versions of this item:
- Auerbach, Alan J, 1995. "Tax Projections and the Budget: Lessons from the 1980's," American Economic Review, American Economic Association, vol. 85(2), pages 165-69, May.
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
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