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Personal Income Tax Revenue Growth and Volatility


  • Gary C. Cornia
  • R. Bruce Johnson
  • Ray D. Nelson


In order to reduce the volatility of the personal income tax in Utah, review and reform efforts recommended a simple flat tax that disallowed all deductions or exemptions. Among the reasons for the recommended flat tax was the argument that it would result in a more stable year-over-year tax revenue stream. This was especially important for education financing. The tax system that was finally adopted retained exemptions and deductions through a tax credit. Using a series of simulations based on twenty-one years of tax returns, we establish that by retaining exemptions and deductions, tax reform efforts failed to appreciably reduce the volatility of personal income tax revenues. These simulations also show that the initially proposed flat income tax with no exemptions or deductions would have decreased volatility at the cost of reducing the growth rate. This study contributes insights, caveats, methodology, and potential alternatives for future individual income tax reforms by focusing on the growth and volatility of three different tax systems.

Suggested Citation

  • Gary C. Cornia & R. Bruce Johnson & Ray D. Nelson, 2017. "Personal Income Tax Revenue Growth and Volatility," Public Finance Review, , vol. 45(4), pages 458-483, July.
  • Handle: RePEc:sae:pubfin:v:45:y:2017:i:4:p:458-483

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    References listed on IDEAS

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