Information sharing and state revenue forecasting performance

• Published in: Public budgeting & finance 2022-12, Vol.42 (4), p.54-73
• Main Authors: Spreen, Thomas L., Martinez Guzman, Juan P.
• Format: Article
• Language: English
• Subjects: Forecasting; Income taxes; Information dissemination; Public officials; Quantitative analysis; Revenue
• ISSN: 0275-1100; 1540-5850
• DOI: 10.1111/pbaf.12329

This study evaluates whether intergovernmental information sharing enhances forecasting performance. This is accomplished by examining the accuracy of state revenue forecasts following the federal passage of the Tax Cuts and Jobs Act (TCJA) of 2017. The quantitative analysis suggests that states that shared information produced more accurate corporate income tax forecasts than nonsharing states. This result is consistent with surveys and interviews of federal and state officials that reported significant information‐sharing activity arising from uncertainty about the TCJA's corporate income tax provisions. This study demonstrates that information sharing plays an important yet overlooked role in mitigating forecast uncertainty. Applications For Practice Professional networks facilitate exchange of specialized knowledge between states and the federal government. Information sharing to mitigate uncertainty occurs between state actors or states and the federal government. Information exchange between state and federal revenue forecasters reduces uncertainty which can enhance forecast accuracy. Governments are encouraged to build and maintain professional networks that promote intergovernmental information sharing.