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A GENERAL MODEL FOR STATE TAX REVENUE ANALYSIS

This paper presents a general structural model for analyzing and forecasting state general fund revenues. Among the most interesting properties of the model are the following: (a) the model explicitly allows for the interaction of various taxes, (b) it permits the calculation of a number of useful tax elasticities , and (c) the sales tax is estimated in constant dollars thereby permitting the analysis of the impact of inflation and relative price changes. Descriptive and predictive properties of the model are presented and comparisons made to alternative single equation specifications.