A static forecast of the revenue effect of a tax rate change assumes that the tax base does not change.

Question

Quizplus · Accepted Answer

A static forecast assumes that the tax base (the amount of taxable income or activity) remains the same regardless of changes in tax rates. This can lead to inaccuracies in predicting the revenue effect of a tax rate change, as changes in rates can impact taxpayer behavior and, consequently, the amount of tax revenue collected.

A Static Forecast of the Revenue Effect of a Tax