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U.S. Revenue Surprises; Are Happy Days Here to Stay?

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Listed:
  • Koshy Mathai
  • Andrew J Swiston
  • Martin Mühleisen

Abstract

A key question for U.S. policymakers is whether the recent strength in federal revenue is likely to continue. This question is addressed through an econometric analysis of the determinants of tax revenue, using time series that are adjusted for tax policy changes. The results suggest that growth in corporate profits and capital gains each contributed forty percent of the increase in the revenue-to-GDP ratio from 2004-2006, and rising income inequality explains much of the rest. While part of the revenue rise is the result of structural changes taking place in the U.S. economy, some of the recent buoyancy is likely to prove temporary, reflecting the highly cyclical nature of these variables.

Suggested Citation

  • Koshy Mathai & Andrew J Swiston & Martin Mühleisen, 2007. "U.S. Revenue Surprises; Are Happy Days Here to Stay?," IMF Working Papers 07/143, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:07/143
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    References listed on IDEAS

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    1. Sobel, Russell S. & Holcombe, Randall G., 1996. "Measuring the Growth and Variability of Tax Bases over the Business Cycle," National Tax Journal, National Tax Association, vol. 49(4), pages 535-52, December.
    2. Sobel, Russell S. & Holcombe, Randall G., 1996. "Measuring the Growth and Variability of Tax Bases Over the Business Cycle," National Tax Journal, National Tax Association, vol. 49(4), pages 535-552, December.
    3. Donald Bruce & William F. Fox & M.H. Tuttle, 2006. "Tax Base Elasticities: A Multi-State Analysis of Long-Run and Short-Run Dynamics," Southern Economic Journal, Southern Economic Association, vol. 73(2), pages 315-341, October.
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    Cited by:

    1. 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.

    More about this item

    Keywords

    Capital income; Revenues; Revenue forecasting; Tax elasticity; Tax revenue; Tax revenues; United States; tax buoyancy; tax system; tax base; tax bases;

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