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Managing Fiscal Volatility By Redefining "Tax Cuts" And "Tax Hikes", David Gamage, Jeremy Bearer-Friend
Managing Fiscal Volatility By Redefining "Tax Cuts" And "Tax Hikes", David Gamage, Jeremy Bearer-Friend
Articles by Maurer Faculty
This report analyzes how states should cope with fiscal volatility at the level of institutional-design policy. We propose that states reconsider how they define terms like ‘‘tax cuts’’ and ‘‘tax hikes.’’ By adopting a new baseline for defining those terms, states can increase the likelihood of using tax rate adjustments to cope with fiscal volatility rather than more harmful spending fluctuations.
Minimizing The Harm Of State Fiscal Volatility, David Gamage, Jeremy Bearer-Friend
Minimizing The Harm Of State Fiscal Volatility, David Gamage, Jeremy Bearer-Friend
Articles by Maurer Faculty
This report’s primary concern is how U.S. state governments should respond to the fiscal volatility created by their balanced budget constraints. Applying the principles of risk allocation theory to this recurring problem, we conclude that states should primarily adjust the rates of broad-based taxes as their economies cycle, rather than fluctuating public spending.