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A Dynamic Analysis of Kansas Tax Reform

A Dynamic Analysis of Kansas Tax Reform. Todd Davidson Fiscal Policy Analyst, Kansas Policy Institute. 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. Static Analysis.

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A Dynamic Analysis of Kansas Tax Reform

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  1. A Dynamic Analysis of Kansas Tax Reform Todd Davidson Fiscal Policy Analyst, Kansas Policy Institute

  2. 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

  3. 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. 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% = …

  5. Causes of Dynamic Revenue • Consumption Effect • Competition Effect • Creation Effect

  6. Consumption Effect

  7. Competition Effect

  8. Competition Effect

  9. Creation Effect

  10. Creation Effect

  11. 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

  12. STAMP Model

  13. Economic Effects of HB 2117 Tax Reform Gears Kansas for Growth, July 2012

  14. Impact of Kansas Tax Reform 2013 - 2018 Tax Reform Gears Kansas for Growth, July 2012

  15. Revenue Forecast of HB 2117 Tax Reform Gears Kansas for Growth, July 2012

  16. Contact Info • KansasOpenGov.org • KansasPolicy.org • (316) 634-0218 • Todd.Davidson@kansaspolicy.org

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