W2018-1 Matching IRS Statistics of Income Tax Filer Returns with PWBM Simulator Micro-Data Output

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Authors: Jagadeesh Gokhale

Abstract: The PWBM Simulator implements micro-level projections of individuals and families in the United States to observed trends and interactions among many demographic and economic variables. Historical estimates and projections are rigorously validated using many sources of micro-data information in the United States. Using PWBM-Simulator output to implement tax policy analysis requires mapping its distributions of individuals and families into distributions of tax filing units with appropriate income elements calibrated to observed features of U.S. tax filers. This paper described the procedures used for augmenting PWBM Simulator’s micro projections with tax variables from the IRS’s public use tax-return samples –the Statistics of Income surveys.

Key Words: Microsimulation, Income tax filers, Imputation procedure, Demographic groups, Rank-order matching, Earnings distributions, Micro-data surveys, Income tax schedules, Adjusted gross income, Taxable income