The research of the Baker Institute Center for Public Finance focuses on the effects of major U.S. fiscal policies. Given the complexity of the U.S. tax system and the unsustainability of current U.S. tax and spending policies, the center in 2017 received a five-year, $3.2 million grant from the Charles Koch Foundation to fund an initiative — the Dynamic Analysis Program — to study the potential effects of fiscal reforms and inform policymakers and the general public about the findings.
The Dynamic Analysis Program also will examine the challenges facing the country if policymakers continue to delay finding and implementing solutions to these critical issues. The program plans to work with other economic modeling groups to increase the accessibility of this type of analysis by creating more open-source models and training students on how to use them.
The simulation of the effects of U.S. tax reforms — including fundamental reform of the individual income tax, more incremental income tax reforms and corporate tax reform — is accomplished using a large-scale dynamic computer general equilibrium model constructed by John Diamond and George Zodrow. Diamond and Zodrow's other work has focused on earnings volatility, income mobility and inequality, alternative funding options for public schools, state and local investment tax incentives, state sales taxation of services, the optimal taxation of electronic commerce, the effects of the property tax, the effects of adopting education vouchers, and public employee pension liabilities. In addition, they and other center scholars actively participate in the policymaking process by advising various national government agencies, state and international governments, and multilateral development institutions, as well as various key individual policymakers. Center scholars have also have been asked to testify before federal and state government committees.
The Center for Public Finance, formerly known as the Tax and Expenditure Policy Program, organized a major conference in April 2006 that focused on various proposals for tax reform that were under discussion in the United States at that time. The proceedings of the conference were published in 2008 by The MIT Press in a volume titled “Fundamental Tax Reform: Issues, Choices and Implications,” edited by Diamond and Zodrow. In October 2011, the Tax and Expenditure Policy Program hosted a conference that examined fiscal policy changes to deal with the short- and long-run deficits facing the United States. Findings from this conference were compiled in a volume titled “Pathways to Fiscal Reform,” edited by Diamond and Zodrow, to be published in 2014 by The MIT Press.
Additionally, Zodrow and Diamond hold key editorial roles at the National Tax Journal, the leading publication for the dissemination of high-quality original research on governmental tax and expenditure policies. Zodrow is a co-editor and Diamond is forum editor. Zodrow was also honored by the National Tax Association in 2010 with the Steven D. Gold Award for significant contributions to state and local fiscal policy.
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