TAXSIM is the NBER's FORTRAN program for calculating liabilities under US Federal and State income tax laws from individual data. Scholars interested in using TAXSIM to calculate tax libiabilities should follow the these instructions for submitting data. The program itself is not released.
Version 3.0Beta introduces:
Please submit a rectangular delimited ASCII file with one case per record, and the following variables for each case:
Marital Status:
This is a simplified list of input variables selected to encompass what might be available in a non-tax oriented survey such as the CPS, CEX, PSID, etc. The items are rich enough to cover the ordinary and supertax brackets, the earned income credit, the child care credit, the partial taxation of Social Security, and UI, the secondary earner deduction, and other important features of the tax code. Obviously ignored are the capital gains deduction, limits, floors and ceilings on deductions, adjustments, tax preferences, etc. These are available in the full model, but are not included here in order to simplify matters.
Here is a sample entry for a single parent of one child in Idaho with only labor income, and $2000 in child care expenses. Notice that no missing value indicator is used - zero amounts are coded as zero.
The file may include any number of such lines. While the format is flexible, and values may be of variable size, each value must be separated from the next by one or more spaces or a single comma. We cannot read .prn files, or any file that uses commas to mark thousands. Spreadsheet files of any kind can not be read. Before uploading your file please check for the following common errors:
Some users are concerned about imputations. Internet TAXSIM doesn't do any. Anything not listed above becomes a zero on the Form 1040. Zero is always a valid entry, although it may be inaccurate.
TAXSIM will calculate the federal and state tax liability, and also the additional liability on an additional $300 in wage or nonwage income. These marginal rates are important to us, because one of the most important uses TAXSIM can be put to is calculating correct after-tax prices in models of economic behavior. A problem has been the presence of notches and otherwise implausible marginal rates in the rates calculated. Although these notches generally involved small sums of money, they could have disproportionate effects on the results of a linear regression. Some of the anomolies arose from defects in our FORTRAN code, these have been corrected where found. Some arose from actual notches in the tax laws. Where feasible, these have been smoothed over. For example, in the federal law the child care credit is an integer percent of child care expenses, depending on AGI. In this case we have used a smooth interpolation instead between adjacent percentages. Especially at the state level some credits are just a fixed amount for taxpayers with income less than X. In that case the range for an interpolation isn't obvious and we have not done one. So some notches will remain. We have reduced the size of the notches by calculating the marginal rate over a $300 range instead of the $100 range used in Version 2 of Internet TAXSIM. This reduces the average squared effect of the notches.
These results will be returned to you together with a summary by state of average incomes and rates. We have gone to considerable lengths to reduce the number of glitches showing up as implausible marginal rates, including smoothing some small notches by interpolation. A few notches are too large for that and will show up in rare cases. If you are concerned about any particular case, isolate that case and send it to us for review.
If you suspect any case has been calculated incorrectly, please extract that case (or a exemplar, if there are many cases) and email it to me with a statement of how you think the tax calculation ought to have been made. I will get back to you within a couple of days with an explanation or a fix. It is important that you not send large files or attachments. Just send an email with a few cases, the response and the reason you believe the response to be in error.
Some users have expressed concern about our ability to process large files, but files up to 50,000 cases are not a problem. Larger files should probably be broken up and run in the evening. Anytime you are getting timed out, please wait several hours and try again, as the time-outs are a sign that something is overloaded.
Users of the AHEAD and HRS are reminded that they are not permitted to send state identifiers to us. If such users need state tax calculations they should send each record 51 times, once for each possible state, and select the correct record from among the returned records.
This paper and this URL (http://www.nber.org/~taxsim/taxsim.html) should be cited if any results from TAXSIM are circulated or published. If you intend to make any serious scholarly (or other) use of Internet TAXSIM you should speak with about your project on the telephone. I am at 617-588-0343 and can offer advice etc.
Daniel Feenberg
NBER
1050 Mass Ave.
Cambridge MA 02138
617-588-0343
feenberg@nber.org