Improving CBO’s Methodology for Projecting Individual Income

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Improving CBO’s Methodology for Projecting Individual Income Tax Revenues
by Douglas Elmendorf
In preparing its annual report on the budget outlook and updates to that report during the course of the year, CBO projects revenues from the federal individual income tax. A background paper released today discusses two ways to use information about tax collections to improve those projections of tax receipts: Explicitly using the information provided by recent tax collections to adjust the projections, and basing the projections on multiple years of tax return information. The results of CBO’s analysis suggest that combining the two approaches modestly improves the near-term projection of individual income tax revenues. Based on those findings, CBO has used this combination of approaches in estimating revenues in recent years.
http://cboblog.cbo.gov/?p=1822