U.S. Revenue Surprises: Are Happy Days Here to Stay?

31 Pages Posted: 23 Aug 2007

See all articles by Andrew J. Swiston

Andrew J. Swiston

International Monetary Fund (IMF)

Martin Mühleisen

International Monetary Fund (IMF)

Koshy Mathai

International Monetary Fund (IMF)

Date Written: June 2007

Abstract

A key question for U.S. policymakers is whether the recent strength in federal revenue is likely to continue. This question is addressed through an econometric analysis of the determinants of tax revenue, using time series that are adjusted for tax policy changes. The results suggest that growth in corporate profits and capital gains each contributed forty percent of the increase in the revenue-to-GDP ratio from 2004-2006, and rising income inequality explains much of the rest. While part of the revenue rise is the result of structural changes taking place in the U.S. economy, some of the recent buoyancy is likely to prove temporary, reflecting the highly cyclical nature of these variables.

Keywords: Working Paper, United States, Revenues, Tax revenues, Tax elasticity, Income

Suggested Citation

Swiston, Andrew J. and Muhleisen, Martin and Mathai, Koshy, U.S. Revenue Surprises: Are Happy Days Here to Stay? (June 2007). IMF Working Paper No. 07/143, Available at SSRN: https://ssrn.com/abstract=1007892

Andrew J. Swiston (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Martin Muhleisen

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Koshy Mathai

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

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