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Estimating the sensitivity of state tax revenue to cyclical and wealth effects

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  • William Seyfried
  • Louis Pantuosco

Abstract

In this study, we estimate the elasticities of alternative sources of state tax revenue relative to the economy, as measured by GSP, and to wealth, as measured by the S&P500. Next, efficient tax frontiers are estimated for each state by minimizing the standard deviation, given the current average growth rate of revenues. It is shown how states could attain the same expected growth rate of tax revenues with less volatility by modifying the composition of their existing tax structures. In most cases, corporate income taxes are found to reduce efficiency due to their high volatility without a correspondingly high growth rate. Copyright Academy of Economics and Finance 2003

Suggested Citation

  • William Seyfried & Louis Pantuosco, 2003. "Estimating the sensitivity of state tax revenue to cyclical and wealth effects," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 27(1), pages 114-124, March.
    • Handle: RePEc:spr:jecfin:v:27:y:2003:i:1:p:114-124
    DOI: 10.1007/BF02751594
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    References listed on IDEAS

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    1. Rajiv Mallick & Oskar Ragnar Harmon, 1994. "Portfolio Analysis and Vertical Equity: a New York Application," Public Finance Review, , vol. 22(4), pages 418-438, October.
    2. Gali, Jordi, 1990. "Finite horizons, life-cycle savings, and time-series evidence on consumption," Journal of Monetary Economics, Elsevier, vol. 26(3), pages 433-452, December.
    3. James M. Poterba, 2000. "Stock Market Wealth and Consumption," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 99-118, Spring.
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    Cited by:

    1. Yilin Hou, 2005. "Fiscal Reserves and State Own-Source Expenditure in Downturn Years," Public Finance Review, , vol. 33(1), pages 117-144, January.
    2. Guido Wolswijk, 2009. "The short- and long-run tax revenue response to changes in tax bases," Economics Bulletin, AccessEcon, vol. 29(3), pages 1960-1970.
    3. Soyoung Park & Sungchan Kim, 2022. "The Effects of Fiscal Rules Based on Revenue Structure: Evidence from U.S State Governments," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(3), pages 763-781, October.
    4. Marina Malkina & Rodion Balakin, 2020. "Risks of Regional Tax Systems and Their Portfolio Decomposition: The Case of Modern Russia," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 68(6), pages 995-1009.
    5. Ali Culha, 2012. "Turkiye’de Vergi Gelirlerinin Iktisadi Dongulere Duyarliligi," CBT Research Notes in Economics 1234, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

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