This document describes the methods used to compare model-plus-dataset estimates of basic federal tax amounts against corresponding federal agency estimates.
The basic tax amounts that will be compared include:
- Payroll Tax Liability (federal employee plus employer share)
- Individual Income Tax Liability (federal individual income tax)
- CTC Tax Expenditure (from the federal child tax credit)
- EITC Tax Expenditure (from the federal earned income credit)
- SSBEN Tax Expenditure (from excluding some social security benefits from federal AGI)
- NIIT Tax Expenditure (from the 3.8% federal surtax on investment income)
- CGQD Tax Expenditure (from taxing long-term capital gains and qualified dividends at lower federal rates)
- QBID Tax Expenditure (from the 20% federal qualified business income deduction)
- SALT Tax Expenditure (from the itemized deduction of state and local income and property taxes)
The federal agencies --- CBO, JCT, and TSY --- publish tax amounts for
federal fiscal years. The model-plus-dataset estimates are for
calendar years. In order to make the federal agency estimates
comparable to the model-plus-dataset estimates, the estimates for the
two fiscal years overlapping with the calendar year are used in a
simple linear interpolation and linear extrapolation of the two fiscal
year estimates to produce a calendar year estimate. This linear
adjustment is done by the fy2cy.awk script using as input one of
three files containing federal agency estimates for a pair of fiscal years.
For example, the following three files contain estimates for fiscal years 2023
and 2024: cy23_cbo.csv, cy23_jct.csv, and cy23_tsy.csv. There are
three files for each of several years: cy23, and cy26.
These .csv files, all of which are in the examination directory,
contain detailed information about the source of the federal agency
estimates.
In the first phase of this project, the Tax-Calculator (3.5.0) microsimulation model is used to compute tax estimates that correspond to the federal agency estimates described above. Tax-Calculator is used with two different 2023 input datasets.
The first, which is called the taxdata dataset, is the CSV-formatted
dataset created for Tax-Calculator in the taxdata
repository. It contains 2011
TSY SOI PUF data, supplemented with CPS data, that is extrapolated to
calendar year 2023.
The second, which is called the phase 1 dataset, is a CSV-formatted
version of the hierarchical dataset created for the Policyengine-US
(0.680.0)
microsimulation model. It contains 2022 CPS data, enhanced with 2015
TSY SOI PUF data, that is extrapolated to calendar year 2023.
(Subsequent phases of this project will develop other datasets.)
In both these input dataset cases, the same procedure is used to
estimate the amounts corresponding to the federal agency estimates.
This procedure involves using the Tax-Calculator's
command-line-interface tool,
tc, in the
examination/taxcalculator directory. The payroll and individual
income tax liabilities are estimated using the
clp.json null reform to produce
estimates for 2023 baseline tax policy. Each tax expenditure estimate
is generated using a simple reform that negates that feature of
baseline tax policy. The several tc runs are collected into a
single shell script called examination/taxcalculator/runs.sh, which
in turn calls the examination/taxcalculator/execute.sh script for
each run. The simple tax expenditure reforms are included in the
following JSON files:
- CTC Tax Expenditure:
ctc.json - EITC Tax Expenditure:
eitc.json - SSBEN Tax Expenditure:
ssben.json - NIIT Tax Expenditure:
niit.json - CGQD Tax Expenditure:
cgqd.json - QBID Tax Expenditure:
qbid.json - SALT Tax Expenditure:
salt.json
The 2023 results from these two sets of tc runs are in the
examination/taxcalculator/puf-23.res-expect file for the
taxdata dataset and in the
examination/taxcalculator/pe23-23.res-expect file for the
phase 1 dataset.
In the second phase of this project, the Tax-Calculator (3.5.3) microsimulation model is used to compute tax estimates that correspond to the federal agency estimates described above. Tax-Calculator is used with two different sets of 2023 and 2026 input datasets.
The first, which is called the taxdata dataset, is the CSV-formatted
dataset created for Tax-Calculator in the taxdata
repository. It contains 2011
TSY SOI PUF data, supplemented with CPS data, that is extrapolated to
calendar year 2023 and to calendar year 2026.
The second, which is called the phase 2 dataset, is a CSV-formatted
dataset developed by this project. It contains 2015 TSY SOI PUF data
enhanced with 2022 CPS data backcasted to 2015. The resulting 2015
dataset is then extrapolated to 2021 so that the 2021 dataset
generates aggregate and AGI-group statistics similar to those
published by TSY SOI for that year. Finally, simpler extrapolation
methods are used to generate datasets for 2023 and 2026 from the 2021
dataset.
In both these input dataset cases, the same procedure is used to
estimate the amounts corresponding to the federal agency estimates.
This procedure involves using the Tax-Calculator's
command-line-interface tool,
tc, in the
examination/taxcalculator directory. The payroll and individual
income tax liabilities are estimated using the
clp.json null reform to produce
estimates for 2023 or 2026 baseline tax policy. Each tax expenditure
estimate is generated using a simple reform that negates that feature
of baseline tax policy. The several tc runs are collected into a
single shell script called examination/taxcalculator/runs.sh, which
in turn calls the examination/taxcalculator/execute.sh script for
each run. The simple tax expenditure reforms are included in the
following JSON files:
- CTC Tax Expenditure:
ctc.json - EITC Tax Expenditure:
eitc.json - SSBEN Tax Expenditure:
ssben.json - NIIT Tax Expenditure:
niit.json - CGQD Tax Expenditure:
cgqd.json - QBID Tax Expenditure:
qbid.json - SALT Tax Expenditure:
salt.json
The 2023 results from these two sets of tc runs are in the
examination/taxcalculator/puf-23.res-expect file for the
taxdata dataset and in the
examination/taxcalculator/xb23-23.res-expect file for the
phase 2 dataset.
The 2026 results from these two sets of tc runs are in the
examination/taxcalculator/puf-26.res-expect file for the
taxdata dataset and in the
examination/taxcalculator/xb26-26.res-expect file for the
phase 2 dataset.
In the third phase of this project, the Tax-Calculator (4.2.0) microsimulation model is used to compute tax estimates that correspond to the federal agency estimates described above. Tax-Calculator is used with two different sets of 2023 and 2026 input datasets.
The first, which is called the taxdata dataset, is the CSV-formatted
dataset created for Tax-Calculator in the taxdata
repository. It contains 2011
TSY SOI PUF data, supplemented with CPS data, that is extrapolated to
calendar year 2023 and to calendar year 2026.
The second, which is called the phase 3 dataset, is a CSV-formatted
dataset developed by this project. It contains 2015 TSY SOI PUF data
enhanced with 2022 CPS data backcasted to 2015. The resulting 2015
dataset is then extrapolated to 2021 and reweighted so that the 2021
dataset generates aggregate and AGI-group statistics similar to those
published by TSY SOI for that year.
In both these input dataset cases, the same procedure is used to
estimate the amounts corresponding to the federal agency estimates.
This procedure involves using the Tax-Calculator's
command-line-interface tool,
tc, in the
examination/taxcalculator directory. The payroll and individual
income tax liabilities are estimated using the
clp.json null reform to produce
estimates for 2023 or 2026 baseline tax policy. Each tax expenditure
estimate is generated using a simple reform that negates that feature
of baseline tax policy. The several tc runs are collected into a
single shell script called examination/taxcalculator/runs.sh, which
in turn calls the examination/taxcalculator/execute.sh script for
each run. The simple tax expenditure reforms are included in the
following JSON files:
- CTC Tax Expenditure:
ctc.json - EITC Tax Expenditure:
eitc.json - SSBEN Tax Expenditure:
ssben.json - NIIT Tax Expenditure:
niit.json - CGQD Tax Expenditure:
cgqd.json - QBID Tax Expenditure:
qbid.json - SALT Tax Expenditure:
salt.json
The 2023 results from these two sets of tc runs are in the
examination/taxcalculator/puf-23.res-expect file for the
taxdata dataset and in the
examination/taxcalculator/tmd-23.res-expect file for the
phase 3 dataset.
The 2026 results from these two sets of tc runs are in the
examination/taxcalculator/puf-26.res-expect file for the
taxdata dataset and in the
examination/taxcalculator/tmd-26.res-expect file for the
phase 3 dataset.
Beginning in the fourth phase of this project, the most recent version of Tax-Calculator microsimulation model is used to compute tax estimates that correspond to the federal agency estimates described above. See the results4+ document for Tax-Calculator version details.
The 2023 and 2026 tax revenue and tax expenditure estimates using the
most recent version of the tmd data filse are generated as part of
the tax expenditures test and
stored in the tmd/storage/output/tax_expenditures file.
Here are the details of the tax expenditure reforms: