Tax Projections and the Budget: Lessons from the 1980s
Some 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.
|Date of creation:||Feb 1995|
|Publication status:||published as American Economic Review, vol. 85, no, 2, pp. 165-169, (May 1995)|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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- Daniel R. Feenberg & James M. Poterba, 1993.
"Income Inequality and the Incomes of Very High-Income Taxpayers: Evidence from Tax Returns,"
in: Tax Policy and the Economy, Volume 7, pages 145-177
National Bureau of Economic Research, Inc.
- Feenberg, D.R. & Poterba, J.M., 1992. "Income Inequality and the Incomes of Very High Income Taxpayers: Evidence from Tax Returns," Working papers 92-16, Massachusetts Institute of Technology (MIT), Department of Economics.
- Daniel Feenberg & James Poterba, 1992. "Income Inequality and the Incomes of Very High Income Taxpayers: Evidence from Tax Returns," NBER Working Papers 4229, National Bureau of Economic Research, Inc.