THE SHORT-TERM RATIO OF SELF-FINANCING OF TAX CUTS: AN ESTIMATE FOR NORWAY'S 2006 TAX REFORM

This article discusses revenue estimating procedures for changes to the personal income tax. Using partial equilibrium revenue estimates of the personal income tax cuts introduced in Norway in 2006 as an example, we find wide variation in the estimates of the revenue costs of cuts depending on vario...

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Bibliographic Details
Published in:National tax journal 2010-03, Vol.63 (1), p.93-120
Main Authors: Thoresen, Thor O., Aasness, Jørgen, Jia, Zhiyang
Format: Article
Language:English
Subjects:
Estimated taxes
Estimates
Estimation
Financing methods
Income estimates
Income taxes
Indirect taxes
Labor supply
Norway
Personal income
Personal income taxes
Political aspects
Refinancing
Revenue
Self-financing
Studies
Tax cuts
Tax deductions
Tax rates
Tax reform
Tax revenues
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Summary:This article discusses revenue estimating procedures for changes to the personal income tax. Using partial equilibrium revenue estimates of the personal income tax cuts introduced in Norway in 2006 as an example, we find wide variation in the estimates of the revenue costs of cuts depending on various factors, even in the short term. Our revenue estimates take into account labor supply responses and changes in revenues from payroll taxes and indirect taxes, and we compare our results to those obtained using current static revenue estimating procedures. In general, we find that more than 60 percent of the static revenue cost of personal income tax cuts is offset with higher tax revenues from other tax bases and higher personal income taxes due to increases in labor supply.
ISSN:0028-0283
1944-7477
DOI:10.17310/ntj.2010.1.04