The Random Coefficient Approach for Estimating Tax Revenue Stability and Growth

Otsuka, Yasuji; Braun, Bradley M.

doi:10.1177/109114219902700606

Cited by 16 publications

(9 citation statements)

References 13 publications

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“…Variation occurs as the income elasticity for taxable durable goods categories declines in recessions and rises in expansions and moves in the opposition direction for nondurable goods. Otsuka and Braun (1999) use a random coefficient model and generally confirm the Fox and Campbell results.…”

Section: Literature Reviewsupporting

confidence: 74%

Tax Base Elasticities: A Multi‐State Analysis of Long‐Run and Short‐Run Dynamics

Bruce

Fox

Tuttle

2006

Southern Economic Journal

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We examine the relative dynamic responses of state personal tax revenues and sales tax bases to changes in state personal income. Our econometric analysis, which includes separate analyses of long‐run and short‐run dynamics for each state, permits the estimation of asymmetric short‐run responses depending upon the relationship between current and expected tax base growth. Results indicate that the average long‐run elasticity for income taxes is more than double that for sales taxes. Most states have asymmetric short‐run income elasticities, which are again greater for income taxes than for sales taxes. However, a joint analysis of long‐ and short‐run dynamics reveals that neither tax is universally more volatile. After calculating state‐specific income elasticities for both taxes, we employ cross‐section regression techniques to explain the variation in elasticities across states. Several policy factors are found to be important, including elements of tax bases and rate structures.

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Section: Literature Reviewsupporting

confidence: 74%

Tax Base Elasticities: A Multi‐State Analysis of Long‐Run and Short‐Run Dynamics

Bruce

Fox

Tuttle

2006

Southern Economic Journal

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“…Fox and Campbell (1984) find dramatic shifts in the income elasticities of 10 disaggregated Tennessee sales taxes and provide evidence that the sales tax is unstable using a varying elasticity, fixed coefficients model. Their results are also robust to a random coefficient model specification (Otsuka and Braun 1999). Nichols and Tosun (2008) compare casino revenue to income and sales tax short-and long-run elasticities using DOLS and ECM, respectively.…”

Section: Discussionmentioning

confidence: 94%

Growth and Variability of School District Income Tax Revenues: Is Tax Base Diversification a Good Idea for School Financing?

Hall

Koumpias

2018

Contemporary Economic Policy

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School districts in Ohio have the option of diversifying their revenue base by adopting income taxes. Using a panel of Ohio school districts that adopted a local income tax from 1990 to 2008, we find that revenues are procyclical and fluctuate only mildly. The estimated short‐ and long‐run income elasticity of school district income tax revenues is 1.05 and 1.04, respectively. We also find that the school district tax base fully adjusts to its long‐run equilibrium within 2 years. Finally, we show that school district income tax adoption does not provide more stability to total school district tax revenues in the short or the long run. (JEL H71, H75)

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“…The literature built on this work has focused on the income elasticities and stability of state and local taxes. 2 Fox and Campbell (1984) and Otsuka and Braun (1999) looked at how the stability changed over time and with the business cycle. Dye and McGuire (1991) separate tax revenues into revenues from sales taxes and income taxes to determine which tax base is less volatile.…”

Section: Introductionmentioning

confidence: 99%

The Performance of State Tax Portfolios During and After the Great Recession

Seegert¹

2015

National Tax Journal

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State tax revenues continue, since the Great Recession, to experience elevated volatility relative to previous decades. The elevated tax revenue volatility is due to both economic uncertainty and the riskiness of the tax portfolios state governments are holding. Since the Great Recession, 18 states have increased the riskiness of their tax portfolio. However, many of these states were constrained to accept additional volatility in exchange for additional tax revenues. The mean-volatility constraint state governments face depends on numerous tax system characteristics. For example, states that tax groceries under the sales tax base and have less progressive income taxes are able to increase revenues and accept less volatility than states that exempt groceries from their sales tax base and have a progressive income tax.

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The Random Coefficient Approach for Estimating Tax Revenue Stability and Growth

Cited by 16 publications

References 13 publications

Tax Base Elasticities: A Multi‐State Analysis of Long‐Run and Short‐Run Dynamics

Tax Base Elasticities: A Multi‐State Analysis of Long‐Run and Short‐Run Dynamics

Growth and Variability of School District Income Tax Revenues: Is Tax Base Diversification a Good Idea for School Financing?

The Performance of State Tax Portfolios During and After the Great Recession

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