Implementation of National Bureau of Economic Research's Taxism in the Consumer Expenditure Survey: How Do the Estimates Measure Up?

• Activity Number: 181
• Type: Contributed
• Date/Time: Monday, August 5, 2013 : 10:30 AM to 12:20 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Laura Paszkiewicz*+
• Companies: Bureau of Labor Statistics
• Keywords: TAXSIM ; federal surveys ; tax liability ; consumer expenditures ; Nonresponse ; savings rate

Abstract

Accurate tax information is important for researchers using the Consumer Expenditure Survey (CE) data. It allows researchers to calculate after-tax disposable income and savings rates and to study the effects of taxes on spending. Historically, the CE has not been able to provide an accurate reporting of taxes paid by consumers due to a high non-response to tax related questions. To increase the quality and value of the CE data, the CE Division plans to use the National Bureau of Economic Research's (NBER) TAXSIM software to estimate federal and state income tax liability.

This paper details the methods used to create inputs to TAXSIM along with required assumptions. It will then compare preliminary TAXSIM-estimated results in the CE to tabulations of IRS Statistics of Income (SOI) data for validation, explaining the underlying differences between the sources. The TAXSIM software has been validated by NBER against the IRS SOI data, so any resulting differences between the CE estimated taxes to the IRS tabulations are due to CE inputs and assumptions made.