The Beacon Hill Institute is an independent, nonpartisan economic research organization that applies a market-clearing approach to the analysis of tax, fiscal and regulatory issues. BHI combines innovative solutions and state-of-the-art econometric and statistical methods in the analysis of public policy issues affecting the nation and the states.
The Economics of STAMP
STAMP is a computer program designed to provide the user with the ability to perform tax policy “simulations”– analyses of how hypothetical tax changes will affect the state economy. A typical run of the model will answer questions such as, “How will a change in the top state personal income tax rate affect employment in the state? How will it affect employment in the construction sector? In the sector that manufactures industrial machinery and equipment? How will a change in the corporate income tax rate affect capital spending in the transportation sector? In retail trade?”
STAMP is available to state governments, research institutes and other entities and persons doing research on state tax policy. The Beacon Hill Institute for Public Policy Research, housed in the Department of Economics at Suffolk University in Boston, Massachusetts is ready to build a STAMP model tailored to the issues important to your state.
How STAMP works
Read details of the model here in PDF format.
STAMP and LAMP are CGE (computable generalized equilibrium) models that account for and analyze the economic effects of tax policy changes. A CGE model is “computable” in the sense that it requires the solution of a system of nonlinear simultaneous equations for each policy simulation. It is “general” because it allows for the interdependence and interaction of all markets, their prices and their quantities. It is in “equilibrium” because supply is assumed to equal demand in each market.
This means that there are no “Keynesian” elements in the model. STAMP/LAMP is a market-clearing model. Tax policy changes are shown to affect economic activity through their effects on the prices of outputs and of the factors of production (labor and capital) that enter into those outputs.
In building the model, we first construct a “baseline” scenario in which we solve the model for five years into the future on the assumption that current tax law remains unchanged. This scenario provides the basis for an Excel spreadsheet, provided to the user, in which the user can enter hypothetical, alternative tax-law changes. The spreadsheet executes an order (received over the Internet by the BHI server) to re-solve the model for the indicated tax-law changes. The effects on the model’s variables are then displayed on the spreadsheet. The user can use the spreadsheet on any computer that uses a recent version of Microsoft Windows and that has access to the Internet..
The model provides values of the following variables for both the baseline and the tax-change scenario:
·Gross State or Area product, by expenditure type consumption, gross investment, government purchases and net exports to the rest of the world;
·Savings, by type;
·Aggregate income, by type (wages and capital income);
·Tax revenues and government expenditures, by type;
·Employment, by sector;
·Private capital stock, by sector;
·Net investment, by sector;
·Wages and capital income, by sector of origin;
·Intersectoral flows of final and intermediate goods.
The CGE Team
David G. Tuerck is Executive Director of the Beacon Hill Institute and Professor and Chairman of the Department of Economics at Suffolk University in Boston, MA. He holds a doctorate in economics from the University of Virginia, and has written extensively on issues of taxation and public economics.
Paul Bachman is a the Director of Research at the Beacon Hill Institute. He holds a Master of Science in International Economics degree from Suffolk University and a Bachelor of Arts (Politics) degree from St. Joseph’s University in Philadelphia. He also teaches introductory economics at Suffolk University and has authored several studies on economic policy.
A Written Report. This includes a plain English-description of STAMP as it has been developed for a particular state, along with mathematical detail relating to the structure of the model. It further includes sample simulation results, performed in consultation with the user.
A Software Simulation Program. Each user receives both a desktop and a web-based computer program for performing STAMP simulations. BHI provides instructions in the use of the program and a STAMP hot line for answering users’ questions.
What the press is saying about STAMP
“The foundation hired an independent company, Boston-based Beacon Hill Institute to analyze Pennsylvania’s state tax system. Using state government data, Beacon Hill developed a model to predict how collecting more taxes in Pennsylvania would affect the state’s workforce… The study, “Taxing Electronic Commerce in Pennsylvania: What Legislators Should Know,” finds that taxing Pennsylvania consumers for all their remote purchases from 2001 to 2005 could yield the state between $410.4 millionand $1.53 billion in new revenues”– but the state would forego as many as 94,794 jobs.”
Central Penn Business Journal
“…a study sponsored by Maryland Business for Responsive Government that is being released this week models universal health care proposals and contends any such plan will drive thousands of jobs from Maryland to nearby states. The group projects 30,000 to 117,000 jobs could be lost. It also said such measures could mean increased taxation equivalent to a 13 percent to 233 percent jump in the personal income tax.”
The Washington Times
New York City- STAMP
“The study prepared with the assistance of a Boston economist, David G. Tuerck, uses 25 years of data on city tax changes and compares them with dips or increases in employment and other variables. The report suggested that without the tax cuts imposed over the past four years, the employment growth in New York City would most likely have been just under the national average of 0.4 percent. But with more than $2 billion in tax cuts in that period, employment in the city jumped nearly 11 percent.
The New York Times
“…the Manhattan Institute asked the Beacon Hill Institute to develop…NYC-STAMP, [which] measures the impact of New York City tax cuts on the city’s economy – especially on private sector employment…Here’s what we found: Tax reductions since 1997 have generated more than 80,000 new private-sector jobs…More than 6,500 new jobs will be generated by tax cuts that were included in the city’s fiscal 2002 budget…And nearly 15,000 more jobs could be added to New York’s employment base by eliminating what’s left of the personal-income-tax surcharge.”
New York Post
“[On the proposed increase in tobacco taxes] Dwight Lee, professor of economics and the Ramsey Chair of Private Enterprise at the University of Georgia’suggests they will raise some revenue no doubt about it but it will be less than they anticipate.’ Lee’s assertion is supported by the Beacon Hill Institute at Suffolk University in Boston, which recently released a sophisticated analysis of the impact of the tobacco tax increase on Georgia. Using a State Tax Analysis Modeling Program, which predicts scenarios based on the state’s tax and historical economic data, the institute found that if the legislation is approved, the state would net just $290.5 million in cigarette taxes in fiscal 2004, not nearly the $311 million the government is hoping for.”
Rome (Georgia) News Tribune
“The Wisconsin Policy Research Institute used computer simulations at Suffolk University in Boston to predict the effects of raising both the sales and income tax to fill a $1.6 billion hole in the budget’s first year. If lawmakers raise the sales tax from 5 percent to 7.4 percent, the state would bring in $160 mi illion in additional revenue in the first budget year, enough to fill the deficit, the study found. But the sales tax increase would cost 55,514 jobs as it drains money from the economy, said economist David Tuerck who led the simulation.”
Portage (WI) Daily Register