Document Type

Master's Culminating Experience

Publication Date



The Fairborn econometric income tax revenue forecasting model developed establishes a connection between conditions in the local, regional, and national economy and the variance of income tax collections. The model was designed to meet as many of the criteria stated in the Foster Group's Assessment as possible, while still holding to economic theory and econometric modeling procedures. In the model, variation in the predictor variables account for 97% of the variation in income tax collections. Several statistical tests were conducted on the model to insure efficient and unbiased results.

In demonstrating the forecasting procedures for the model, assumptions for high, medium, and low growth in the economy were developed. Given the assumption of low growth and that refunds will be 3% of gross tax receipts, the forecast for net Fairborn income tax revenue collections for 1992 and 1993 are $4,282,712 and $4,633,694 respectively.

Econometric models reflect the conditions present in the local, regional, and national economy at the time of development. Since conditions in the economy are subject to change, the relationship of the predictor variables to income tax revenue collections may change in the future.