ABSTRACT
This chapter focuses on revenue forecasting and estimation. It describes institutional responsibilities, techniques, problems, and issues associated with forecasting and estimation. Information on state revenue forecasting and estimation generally is obtained from individual states or from state membership organizations such as the Council of State Governments or the Federation of Tax Administrators, which conducts periodic surveys of its members on topics such as revenue forecasting. In addition to revenue forecasting, states also estimate the impact of proposed tax changes. Qualitative, or subjective, revenue estimation and forecasting methods rely on expert judgment and opinions. One of the most difficult tasks in building an econometric revenue forecasting model is forecasting the economic variables that are fed into the equations. A microsimulation model is a forecasting technique that uses sample data from actual tax returns to make inferences about the population of individual or business taxpayers. In 1980, just ten states used complex econometric models for revenue forecasting and revenue estimation.
