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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
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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
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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
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Consumption Effect
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Competition Effect
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Competition Effect
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Creation Effect
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Creation Effect
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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
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STAMP Model
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Economic Effects of HB 2117
Dynamic Economic Effects Estimated Gains Due to Tax Reform (2018)
Net employment 33,430
Population 28,516
Real GDP (millions) $771
Investment (millions) $307
Disposable Income (billions) $1.6
Tax Reform Gears Kansas for Growth, July 20124/2/2013
Impact of Kansas Tax Reform 2013 - 2018
Dynamic Revenue EffectsCumulative 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 20124/2/2013
Revenue Forecast of HB 2117
Tax Reform Gears Kansas for Growth, July 20124/2/2013
