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Macroeconomic Analysis of a 10 Percent Cut in Income Tax Rates: Technical Paper 2004-07

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  • Robert Arnold
  • Ufuk Demiroglu
  • Robert Dennis
  • Tracy Foertsch

Abstract

This paper explores the effects of a simple policy change—a 10 percent tax cut—to shed light on the different models CBO uses to examine the macroeconomic effects of policy changes. Most of the models predict that such a simple tax cut will increase GDP and therefore that the revenue loss from the tax cut will be smaller than the conventional estimate predicts over the first 10 years. None of the models predict that as much as 25 percent of the conventional cost could be offset, however. This paper is an expanded version of a paper presented at the

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  • Robert Arnold & Ufuk Demiroglu & Robert Dennis & Tracy Foertsch, 2004. "Macroeconomic Analysis of a 10 Percent Cut in Income Tax Rates: Technical Paper 2004-07," Working Papers 15668, Congressional Budget Office.
    • Handle: RePEc:cbo:wpaper:15668
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    File URL: https://www.cbo.gov/sites/default/files/108th-congress-2003-2004/workingpaper/2004-07_0.pdf
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    Cited by:

    1. Kerk Phillips & Richard W. Evans & Jason DeBacker, 2017. "Integrating Microsimulation Tax Functions into a DGE Macroeconomic Model: A Canonical Example," EcoMod2017 10191, EcoMod.
    2. William Gale & Peter Orszag, 2005. "Economic Effects of Making the 2001 and 2003 Tax Cuts Permanent," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(2), pages 193-232, March.

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