A Dynamic Analysis of Kansas Tax Reform Todd Davidson Fiscal Policy Analyst, Kansas Policy Institute 4/2/2013.

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Presentation transcript:

A Dynamic Analysis of Kansas Tax Reform Todd Davidson Fiscal Policy Analyst, Kansas Policy Institute 4/2/2013

Dynamic and Static Analyses Provide a framework for policy makers Estimates how changes in tax rates will affect tax revenue Each has strengths and weaknesses 4/2/2013

Static Analysis Does not estimate economy’s reactions to changes in tax policy Change in the tax rate will cause a change in tax revenue of equal proportion $100 x 10% = $10 $100 x 5% = $5 4/2/2013

Dynamic Analysis Estimates economy’s reaction to changes in tax policy Change in the tax rate will cause a change in tax revenue of unequal proportion $100 x 10% = $10 $100 x 5% = … 4/2/2013

Causes of Dynamic Revenue Consumption Effect Competition Effect Creation Effect 4/2/2013

Consumption Effect 4/2/2013

Competition Effect 4/2/2013

Competition Effect 4/2/2013

Creation Effect 4/2/2013

Creation Effect 4/2/2013

STAMP Model Beacon Hill Institute at Suffolk University. Computable: generate numeric solutions to concrete policy and tax changes General: take all the important markets and flows into account Equilibrium: set demand equal to supply in every market 4/2/2013

STAMP Model 4/2/2013

Economic Effects of HB 2117 Dynamic Economic Effects Estimated Gains Due to Tax Reform (2018) Net employment33,430 Population28,516 Real GDP (millions)$771 Investment (millions)$307 Disposable Income (billions)$1.6 Tax Reform Gears Kansas for Growth, July /2/2013

Impact of Kansas Tax Reform Dynamic Revenue Effects Cumulative Dynamic Revenue (millions) 2013 – 2018 State income tax$147.0 State sales tax$279.3 Other state tax / revenue$106.7 State totals$533.0 New local revenue$395.9 Total dynamic revenue$928.9 Tax Reform Gears Kansas for Growth, July /2/2013

Revenue Forecast of HB 2117 Tax Reform Gears Kansas for Growth, July /2/2013

Contact Info KansasOpenGov.org KansasPolicy.org (316) /2/2013

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