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PI+ Demonstration: Evaluating Tax and Government Assistance

Presented By Chris BrownAssistant Economist, REMI

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Partial List of Users who Evaluate Tax

• Texas Comptroller• New York City Independent Budget Office • Missouri State Auditor’s Office• New Mexico Legislature • Ohio’s Governor’s Office• Utah's Governor’s Office• Massachusetts Department of Finance

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Stimulus Package

www.recovery.gov

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Balanced Budget Dilemma

• States facing large budget shortfalls due to an unprecedented economic downturn

• Tax increases reduce attractiveness of the state to businesses and individuals

• Reducing government weakens the economy

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Model Flexibility

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Dynamic Properties

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Structured Analysis

REMI Model Linkages (Excluding Economic Geography Linkages)

State and Local Government Spending

Investment

(1) Output(1) Output

Output

Exports

Consumption

Real Disposable Income

(4) Wages, Prices, and Production Costs(4) Wages, Prices, and Production Costs

Employment Opportunity

Housing Price

Wage Rate Composite Wage Rate Production Costs

Composite PricesReal Wage RateConsumer Price

Deflator

(3) Demographic(3) Demographic (2) Labor & Capital (2) Labor & Capital DemandDemand

Optimal Capital Stock

Employment

Labor/Output Ratio

(5) Market Shares(5) Market Shares

Domestic Market Share

International Market Share

Population

ParticipationRate

Migration

Labor Force

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Tax Scenario

• Tax– Sales Tax

• Consumer Price variable

– Income Tax• Personal Taxes

*Tax variables require a change in the revenue generated or lost from a policy change

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Government Spending Scenario

• Government Spending– Government sponsored program will reduce

electricity prices• Electricity (Industrial Sector) Fuel Costs• Electricity (Commercial Sector) Fuel Costs

– Offset program with government spending decrease and compare results

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Model Demonstration

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Conclusion