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Government Revenue Forecasting

Understand the impact of economic and policy changes on your tax revenue

State and local economies are constantly evolving with changes in economic structure, industry mix, demographics, public policy and unforeseen economic shocks ultimately shaping the uneven flow of government revenues.  However, as regional economies become increasingly intertwined, events previously thought of as irrelevant or far-flung can now have direct local level impacts. Everything from new tariffs to changing consumer spending to new import patterns can influence local government revenue. For example, weakening economic growth in key Asian economies may weaken export demand for producers in your area. Fluctuating exchange rates and new tariffs may curtail ability for producers to meet demand or influence consumer spending.

Bottom line? Basic trend models that take a one-dimensional view of geographies without holistically incorporating local, national and global impacts and perspective are insufficient to reliably predicting government revenues.

As a strategic partner to state and local fiscal leaders, we work with our clients to quantify how economic and policy changes impact their jurisdictions’ capacity to plan, budget and deliver vital public services. We work closely with city, county, and state budget officers and legislative leaders to inform their revenue estimating and budget process by providing independent forecasts of tax and non-tax revenues that help fiscal process stakeholders achieve better rigor and consensus.  We develop our  custom tax revenue forecasting models by deriving statistical relationships between changes in the levels of individual tax  receipts (e.g. personal and corporate income taxes, sales and use taxes, etc.) and trends in the key economic variables that generate the revenues.

Accurately budget and forecast tax revenues
Contact us to learn how

Sample deliverables

  • Forecasts of tax receipts and key drivers leveraging global inputs
  • Access to underlying driver data
  • Access to models
  • Analytical report describing factors influencing the forecasts
  • Scenario analyses that compare revenue effects of alternative policies and rates
  • Interactive client portal

Methodology highlights

We develop econometric equations and then construct a model to forecast sales and use taxes by sector, personal or individual income taxes on wages and non-wage income, corporate income taxes, excise taxes, and property taxes. Model equations use our proprietary economic and demographic forecasts as inputs. We then use our econometric expertise to estimate statistically significant equations, unique to each jurisdiction and tax type being consider, that explain tax revenue levels over time based on trends in our forecast variables. Similar approaches are also deployed to forecast receipts from non-tax sources such as license fees, room charges, user fees, and tolls on transportation infrastructure.

To project the local tax revenues, we couple our tax models with our detailed forecasts of the macroeconomic, state, MSA and local economies incorporating such variables such as wage and salary disbursements, personal income, retail sales, consumer expenditures by type of good or service including motor vehicles, unemployment rate, value added by sector, output, population change, and home prices. One major IHS Markit competitive advantage in forecasting state and local government revenues is that we already have econometric forecasting models for states and MSA with historical and forecast values for all the major economic and demographic variables that drive government revenues. We then develop and link to them a module that explains the econometric relationships between tax collections and changes in economic activity.  Another advantage is that we use a top-down approach in developing our state and MSA forecasting models. As a result key variables from our energy, industry, US macroeconomic, and global economic forecasts are automatically considered when the state and MSA models are run.

Our state econometric forecasting models already contain a number of variables that are essential to forecasting different types of tax revenues, including: total personal income, wage and salary payments by 2-digit NAICs code, two categories of retail sales, new passenger and light truck vehicle registrations, 21 types of personal consumption expenditures, the CPI, state and local personal tax payments, shipments of manufactured goods and industrial production.  The models also contain, as applicable in an individual state, current tax rates for nine types of major state-level taxes. 

Because of the way our state and MSA forecasting models are designed, and the software used to run them, they can easily be modified to compare the revenue effects of alternative tax policies such different rates, types of goods and services subject to a tax, even alternative economic growth scenarios.  

Our methodology for forecasting government revenues is shown in the flow chart presented below. The figure clearly shows how we leverage all our information and forecasting assets to derive government revenue estimates that are driven by levels of economic activity at the regional, state, US, and global levels. 

Why IHS Markit?

We understand the impact that events abroad can have on local receipts. Our forecast models are fully linked to enable us to quantify changes occurring thousands of miles away on your community.
IHS Markit has over 1,200 world class experts and researchers and 1,400 industry analysts. Our Economics & Country Risk team alone has over 200 economists, country risk analysts, and consultants. We have extensive experience working in the revenue forecasting space, serving numerous countries, states, cities and counties.
Concept coverage
We provide more than 150 indicators per state, metro, and county, 360+ US MSAs, over 1,000 indicators for the US and 5 million international historical economic and financial time series. Our global models cover between 250-800 indicators per country, enabling us to work with the indicators that truly drive your results.
IHS Markit is consistently recognized as the most accurate forecaster for the US economy. Inaccurate forecasting costs you money and causes misappropriation. You can’t afford to be wrong.
Industry intelligence
By leveraging expert analysis across IHS Markit, we can assess industry events and trends and provide our clients with a clearer view of how the ripple effects will be felt throughout the United States.


Jim Diffley

Formerly chief economist of IHS Markit US Regional Services Group, he was responsible for the Regional Core Macroeconomic Service and the Global Insight Real Estate and Construction Service. Since 1998, Mr. Diffley has supervised the quarterly economic forecast of the 50 states and over 300 metropolitan areas of the United States. He regularly makes presentations of these regional economic forecasts and analysis to clients, conferences, governmental bodies and the press.Mr. Diffley is now responsible for customized consulting projects, specializing in public finance. These have included long-term projections of cigarette consumption, forecasts of capital gains realizations, analysis of the economic impact of the securities industry on New York State, analysis of the impact of changing oil prices on local economies and the economic impact of various facility locations. Mr. Diffley's academic work in the US includes a Bachelor of Arts in Mathematics & Economics from State University of New York at Buffalo, a Master of Arts in Economics and a doctorate (ABD) at the State University of New York. From 1982 to 1987, he was on the economics faculty at Adelphi University, US.

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Chris Varvares

Mr. Varvares has nearly 40 years of experience in macroeconomic modeling, forecasting and policy analysis, as co-head of US Economics at IHS Markit, in his previous role as a principal of Macroeconomic Advisers and as a member of the staff of the President's Council of Economic Advisers (1981-1982); he served as a member of the US delegation to the OECD in April 1982. Macroeconomic Advisers was acquired by IHS Markit in 2017. He and the IHS Markit US economic principals serve as consultants to key agencies of the US and foreign governments, major trade associations, and private corporations, and are widely quoted in the business and financial media. IHS Markit is widely recognized as among the most accurate forecasters of the US economy. Mr. Varvares is a recent past president and a former director of the National Association for Business Economics (NABE). He served as president of the NABE Gateway chapter in St.Louis and is a member of the American Economic Association. He serves as a member of the New York State Economic and Revenue Advisory Board and has participated in the meetings of the Outside Consultants to the CBO, has been a panelist for the World Economic Forum, and he sits on advisory boards for the Olin Business School at Washington University and the Walker School of Business and Technology at Webster University. Mr. Varvares holds a Bachelor of Arts in Economics from The George Washington University and received his graduate training (ABD) in Economics from Washington University in St. Louis, where he was also a member of the adjunct faculty in both the economics department and the Olin School of Business.

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David Iaia

Mr. Iaia oversees the state, metro, and county forecasts covering more than 300 metropolitan areas and 3,100 counties. He manages staffing and has an active role in development and enhancement of the group's data methodology. Additionally, he is the primary analyst for Virginia, Maryland, the District of Columbia, and Connecticut. He has done consulting work on the cost of doing business in states and for the U.S. Conference of Mayors on the importance of metro areas in the national economy. Prior to joining the company in 1998, Mr. Iaia was a graduate student in economics at Brown University, completing all the requirements but the dissertation. He also holds a Bachelor of Arts in Economics from Amherst College.

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Mr. Mohsen Bonakdarpour

Mohsen Bonakdarpour is Executive Director of consulting in the Economic and Country Risk Division of IHS Markit, working on macroeconomic and industry economics since 1986. He brings more than 30 years of experience in macroeconomic, regional, and industry consulting with a strong focus on scenario analysis, economic impact assessments, and applications of market planning. Mohsen has been responsible for development of a detailed regional application (Business Market Insights) and global information and communication technology capability. He has expertise in regional economic impact assessment and is fluent in relevant modeling tools to a wide array of issues and policies.Mr. Bonakdarpour worked as a partner with Cisco's Global Market Intelligence group to build a model to estimate total addressable market for network technologies and services. The model has become on the forefront of strategic marketing initiative for Cisco via their global market view model and database.Mohsen was the project manager for series of large scale energy related projects including Crude Oil Export Decision - the Fact-based study and analysis played an important role in lifting the ban, Americas New Energy Future - studies had an extraordinary impact at a time of debate over future of shale and was cited in Presidential State of the Union Address, and Restarting the Engine in US Gulf of Mexico - client used the research to have BOEMER accelerate licensing process in the Gulf of Mexico.Mr. Bonakdarpour holds an M.A. in Economics and a B.S. in Economics and Computer Science from Temple University.

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Alexia Ash

Ms. Ash is a quantification expert within the country risk team. She is experienced at using methods including risk indexing, stochastic processes, Bayesian modelling, and regression analysis. She was on the development team for Every Point on the Planet (EPOP), IHS Markit's flagship country risk mapping tool. She has worked on projects for private sector clients to provide probabilistic modelling of terrorist attacks by specific location and time frame; to design methodology to identify percentage probabilities for scenarios affecting food and water security in the Middle East; and to model the impact of economics and country risk on asset investments. Ms. Ash holds a Bachelor of Arts in mathematics, as well as a Bachelor of Arts in political science from the University of Florida in the United States, and Master of Science in global political economy from the London School of Economics (LSE), United Kingdom.

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