Summary
This study examines whether rules, particular participants, and executive politics in state tax revenue estimation exert measurable influences on forecast error. Fixed-effects estimation using data from states' respective fiscal years 1994 to 2003 indicates that all impact state tax revenue forecast accuracy in varying ways, and results suggest that policy can be crafted to effectively mitigate forecast error. Further examination of the quality of participation in tax revenue forecasting as well as the mechanisms of political involvement in this arena is suggested.
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Extract
Rules, Participants, and Executive Politics in State Tax Revenue Forecasting
INTRODUCTION
The influences of various political, economic, and institutional1 parameters on state tax revenue forecasting have been measured in a number of ways. This study seeks to contribute to the literature by examining whether rules, particular participants, and executive politics in state tax revenue estimation exert measurable effects on forecast error. Identifying the effects of these previously untested parameters would provide useful and meaningful information to state governments, as an accurate and reliable revenue forecast is essential to efficient public budgeting. The approach here yields the following research questions:1) How do the political, administrative, and independent entities involved in state tax revenue forecast preparation affect forecast error?2) How do rules and procedures of state tax revenue forecast preparation affect forecast error?3) How do executive politics affect forecast error?As suggested by these questions, the three categories that are utilized for organization in this study are the following: 1) the entities involved in forecast preparation; 2) rules and procedures of forecast preparation; and 3) e...See the full content of this document
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