Managing Fiscal Volatility by Redefining ‘Tax Cuts’ and ‘Tax Hikes’
12 Pages Posted: 12 Oct 2010
This report analyzes how states should cope with fiscal volatility at the level of institutional-design policy. We propose that states reconsider how they define terms like ‘‘tax cuts’’ and ‘‘tax hikes.’’ By adopting a new baseline for defining those terms, states can increase the likelihood of using tax rate adjustments to cope with fiscal volatility rather than more harmful spending fluctuations.
Keywords: Fiscal Volatility
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