About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

LOG IN
LOG IN


1 Overview of the Tax Foundation's General Equilibrium Model, February 2025 Update 1 (2025)

handle is hein.taxfoundation/overotx0001 and id is 1 raw text is: *%TAX FOUNDATION Overview of the Tax Foundation's General Equilibrium Model February 2025 Update The Tax Foundation uses and maintains a General Equilibrium Model to simulate the effects of govern- ment tax and spending policies on the economy and on government revenues and budgets. The model can produce both conventional and dynamic revenue estimates of tax policy. The model can also produce estimates of how policies impact macroeconomic aggregates such as gross domestic product (GDP), wages, employment, the capital stock, investment, consumption, saving, and the trade deficit. Lastly, it can produce estimates of how different tax policies impact the distribution of the federal tax burden. The mod- el can analyze the effects of most types of taxes. It can estimate the effects of changes to the rate and the base of the individual income tax, the corporate income tax, payroll taxes, taxes on wealth like estate and gift taxes, and excise taxes. The Tax Foundation model has three main components that work together to produce estimates. The first component is a tax simulator, which produces conventional revenue and distributional estimates as well as estimates of marginal tax rates on different sources of personal and business income. The second component is a neoclassical production function, which estimates long-run changes in the level of output based on changes in the capital stock and labor force in response to policy. The last component is an allocation model, which takes outputs from the tax and production models and combines with aggregate accounting identities and saving responses to forecast the different components of GDP, the balance be- tween saving and investment, the international account, wealth, and gross national product (GNP). The Tax Foundation model produces estimates of the long-run impact of tax policy as well as the year- by-year path of the economic adjustment and the impact of tax policy on the government budget over the usual 10-year budget window. The Tax Foundation is the world's leading nonpartisan tax policy 501 (c)(3) nonprofit. For over 80 years, our mission has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity. TAX FOUNDATION 1325 G STREET, NW, SUITE 950, WASHINGTON, DC 20005 202-464-6200 1 taxfoundation.org