THE OPTIMAL STATE-TAX PORTFOLIO MODEL - AN EXTENSION

Several studies have estimated a two-goal efficiency frontier of optim al tax portfolios and found that the actual portfolio under analysis w as inefficient relative to the efficiency frontier. Revenue growth and stability are the two goals recognized. EquitY is a third goal, and t his paper expands the methodology utilized to estimate a three-goal ef ficiency frontier. It is found that in the case of New York, the actua l Portfolio is relatively close to the three-goal efficiency frontier. This result suggest, that for states where tax distributional issues are important, a three-goal, instead of a two-goal, efficiency frontie r is a better measure of achieved results.