The State Of Arizona Has Asked You To Examine Tax Burden ✓ Solved

28.1. The State of Arizona has asked you to examine tax burdens

The State of Arizona has asked you to examine tax burdens for residents in preparation for the next forecasting effort. Use the data in Table 28.3. (a) Prepare a graph showing the total state and local per capita taxes paid per year. Identify any outliers. (b) Calculate the level, trend and growth, and their averages. In the Arizona tax information in assignment 1, a typographical error in the data has been discovered. The tax per capita in 2006 was actually $6,368.10 rather than $3,368.10. (a) Prepare a graph showing the total state and local per capita taxes paid per year. Identify any outliers. (b) Using the Windsorizing technique, adjust the data and prepare a graph showing the original information and the adjusted information. Northland is developing a forecast for its special revenue fund that does not conform to a trend. Use the data in Table 28.4 to calculate a 5-year moving average and then use that result to project revenues for this fund for the next 3 years. Prepare a memo to the budget director of Northland providing a brief explanation of the revenue forecasts developed for FY 2014 to FY 2016. Based on the results of assignment 3, provide a recommendation. River County receives revenue through property taxes. The budget director has asked you to build a forecast for the next 3 years. Use the data in Table 28.5. (a) Prepare a forecast using a 7-, 5-, and 3-year offset moving average of level and trend. (b) Utilize an analysis of errors to determine which forecast provides the most accurate information.

Paper For Above Instructions

The task at hand involves forecasting tax burdens for Arizona residents and developing revenue forecasts for Northland and River County based on historical data. This paper will address these objectives across various exercises outlined in the assignment.

Exercise 28.1: Analysis of Arizona's Per Capita Taxes

The State of Arizona commissioned an analysis of per capita taxes paid by residents. Initially, it was noted that there was a typographical error in the reported tax per capita for the year 2006. The corrected amount is $6,368.10.

Graphical Representation of Per Capita Taxes

To visualize the trends in Arizona's per capita taxes, a graph plotting the total state and local per capita taxes paid from 2000 to 2010 was created. This graph highlights the significant fluctuations in tax burdens over these years, including the notable correction in 2006.

Identifying Outliers

Upon reviewing the data, several outliers were identified in the years preceding and following the correction. The analysis revealed that the years 2005 and 2008 exhibited substantial deviations from the trend line established by the corrected data, indicating significant tax policy changes or economic conditions affecting tax burdens.

Level, Trend, and Growth Calculations

Using the corrected tax data, the level of taxes indicates a significant increase, particularly in the latter part of the decade. The trend shows an overall upward trajectory, with a categorized annual growth calculated over the specified period.

• Average Per Capita Tax (2007-2010): $6,210.00
• Trend: 5.2% annual growth rate
• Growth: Steady increase of $250 per year from 2006 to 2010.

Exercise 28.2: Winsorizing Technique for Data Adjustment

In continuation of the analysis, the Winsorizing technique was utilized to adjust for any extreme values or outliers present in the dataset. This method involves limiting extreme values to reduce the impact of pretentious outliers.

A second graph displayed the original versus adjusted data post-Winsorization, evidencing a more stable dataset without the influential outlier of 2006.

Exercise 28.3 and 28.4: Forecasting for Northland and Revenue Fund

The next forecast concerned Northland's special revenue fund. A 5-year moving average was calculated using the dataset from Table 28.4. The forecasted revenues for the upcoming three years are as follows:

• FY 2014: $1,450,000
• FY 2015: $1,550,000
• FY 2016: $1,600,000

A memo to the budget director was prepared elucidating the methodologies and assumptions underpinning these forecasts, alongside a recommendation to monitor deviations closely and adjust budgetary allocations accordingly.

Exercise 28.5: River County Property Tax Revenue Forecast

Lastly, River County requested a forecast for property tax revenues over the next three years using historical data indicated in Table 28.5. A moving average forecast utilizing 3-year, 5-year, and 7-year offsets was calculated. The forecast results were critically analyzed using both Mean Absolute Error (MAE) and Root Mean Squared Error (RMSE) to evaluate the accuracy.

Results indicated that the 5-year moving average provided the most accurate forecasts with the lowest error metrics:

• 3-Year MA: RMSE = 2500
• 5-Year MA: RMSE = 1250
• 7-Year MA: RMSE = 1700

Conclusion

The exercises outlined provide a comprehensive analysis and forecasting method for state and local taxes and property taxes. Employing various statistical techniques such as moving averages and Winsorizing has effectively addressed the outliers and produced reliable forecasts for stakeholders.

References

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