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Dynamic Revenue Estimation

Author

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  • Alan J. Auerbach

Abstract

This paper considers the question of adopting 'dynamic' revenue estimation methods, which would incorporate the predicted macroeconomic effects of policies. It describes the current revenue estimation process and how these estimates are used in the formation of policy. It then evaluates this process as an exercise in forecasting, considering not only its methodology but also its performance. This evaluation illustrates some of the difficulties that would accompany attempts to use dynamic methods. Finally, the paper relates the choice among different revenue estimation procedures to the political process and the use to which the revenue estimates are put.

Suggested Citation

  • Alan J. Auerbach, 1996. "Dynamic Revenue Estimation," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 141-157, Winter.
  • Handle: RePEc:aea:jecper:v:10:y:1996:i:1:p:141-57
    Note: DOI: 10.1257/jep.10.1.141
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.10.1.141
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    References listed on IDEAS

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    1. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-572, June.
    2. Gerald E. Auten & Joseph J. Cordes, 1991. "Policy Watch: Cutting Capital Gains Taxes," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 181-192, Winter.
    3. Mark Hooker & Michael Knetter, 1994. "Unemployment Effects of Military Spending: Evidence from a Panel of States," NBER Working Papers 4889, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Merola, Rossana & Pérez, Javier J., 2013. "Fiscal forecast errors: Governments versus independent agencies?," European Journal of Political Economy, Elsevier, vol. 32(C), pages 285-299.
    2. Sanz Labrador, Ismael & Sanz-Sanz, José Félix, 2013. "Política fiscal y crecimiento económico: consideraciones microeconómicas y relaciones macroeconómicas," Macroeconomía del Desarrollo 134, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Alan J. Auerbach, 2003. "Fiscal Policy, Past and Present," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 75-138.
    4. Teresa Leal & Javier J. Pérez & Mika Tujula & Jean-Pierre Vidal, 2008. "Fiscal Forecasting: Lessons from the Literature and Challenges," Fiscal Studies, Institute for Fiscal Studies, vol. 29(3), pages 347-386, September.
    5. Thiess Buettner & Bjoern Kauder, 2015. "Political biases despite external expert participation? An empirical analysis of tax revenue forecasts in Germany," Public Choice, Springer, vol. 164(3), pages 287-307, September.
    6. Alejandro Cuñat & Szabolcs Deak & Marco Maffezzoli, 2008. "Tax Cuts in Open Economies," CEP Discussion Papers dp0860, Centre for Economic Performance, LSE.
    7. Eric M. Engen & Jonathan Skinner, 1996. "Taxation and Economic Growth," NBER Working Papers 5826, National Bureau of Economic Research, Inc.
    8. Martin Feldstein, 1996. "How Big Should Government Be?," NBER Working Papers 5868, National Bureau of Economic Research, Inc.
    9. Ivo Bischoff & Wolfgang Gohout, 2010. "The political economy of tax projections," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(2), pages 133-150, April.
    10. Alejandro Esteller & Jorge Navas & Pilar Sorribas, "undated". "Las Cestas Autonómicas," Working Papers 1-02 Classification-JEL :, Instituto de Estudios Fiscales.
    11. Dean Scrimgeour, 2015. "Dynamic Scoring in a Romer-Style Economy," Southern Economic Journal, Southern Economic Association, vol. 81(3), pages 697-723, January.
    12. Alan J. Auerbach, 2005. "Dynamic Scoring: An Introduction to the Issues," American Economic Review, American Economic Association, vol. 95(2), pages 421-425, May.
    13. Auerbach, Alan J., 2002. "The Bush Tax Cut and National Saving," National Tax Journal, National Tax Association;National Tax Journal, vol. 55(3), pages 387-407, September.
    14. Douglas W. Elmendorf, 2015. "“Dynamic Scoring”: Why and How to Include Macroeconomic Effects in Budget Estimates for Legislative Proposals," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 91-149.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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