CBO uses its microsimulation tax model to simulate the effects of tax rules for a representative sample of tax filers in each year of the budget window. The model informs much of CBO’s analysis of the individual income and payroll tax system.
The document discusses the federal budget and return of budget deficits in the United States. It notes that the federal budget deficit grew significantly from large surpluses in 2001 to large deficits in 2007 due to tax cuts, defense spending, and entitlement programs. The long-term fiscal outlook is challenging due to rising healthcare costs, aging of the population, and tax cuts. Reform of the US healthcare system is needed to control costs and address the growing budget imbalance.
CBO’s new health insurance simulation model creates synthetic firms that mimic the real-world variations between firms to model employers’ decisions about whether to offer employment-based health insurance.
Presentation by Alexandra Minicozzi, a Unit Chief in CBO’s Health, Retirement, and Long-Term Analysis Division, at the 8th Annual Conference of the American Society of Health Economists.
CBO's analyses of the distribution of household income rely on the Census Bureau's Current Population Survey (CPS) for information about receipt of government transfers, particularly means-tested transfers. CPS respondents underreport their receipt of those transfers, and that underreporting has increased over the past few decades. This presentation shows how CBO adjusts for the underreporting of means-tested transfers in its distributional analyses.
CBO and the Joint Committee on Taxation use HISIM2 to estimate the major sources of health insurance coverage and associated premiums for the U.S. population under age 65.
HISIM2 is used in conjunction with other models (for example, those for related taxes, Medicaid, and Medicare) to develop baseline insurance coverage projections and their associated budgetary costs. It is also used to estimate the effects of proposed changes in policies that affect health insurance coverage.
CBO uses HISIM2 to model firms’ decisions to offer health insurance as well as households’ decisions to enroll in health insurance. Like all of CBO’s models, HISIM2 is regularly updated. This slide deck describes the analytical methods used in HISIM2 to model firms’ decisions in CBO’s baseline budget projections as of March 6, 2020.
Presentation by Alice Burns and Jaeger Nelson, analysts in CBO’s Budget Analysis Division and Macroeconomic Analysis Division, to the National Tax Association.
To prepare its spring 2019 baseline budget projections, CBO is using new sources of data as inputs and has completely revamped the way it models consumers’ and employers’ behavior. To that end, it has developed HISIM2, a new version of the model CBO uses to generate estimates of health insurance coverage and premiums for the population under age 65. The model is used in conjunction with other models to develop baseline budget projections (which incorporate the assumption that current law generally remains the same). It is also used to estimate the effects of proposed changes in policies that affect health insurance coverage.
HISIM2 incorporates new base data, including data from surveys and administrative data. It changes the way individuals and families are projected to choose among coverage options. And it changes the way firms are projected to take workers’ preferences into account when deciding whether to offer employment-based coverage.
1. The Congressional Budget Office (CBO) prepares annual economic forecasts that underlie its federal budget projections, including key variables like output growth, unemployment, inflation, interest rates, and wages.
2. CBO evaluates the accuracy of its economic forecasts every two years. Its measures include mean error to assess bias, root mean square error to measure accuracy, and two-thirds spread to illustrate typical error ranges.
3. CBO's forecasts tend to be slightly more accurate and less biased than the Administration's, and on par with the Blue Chip consensus forecasts. Major sources of forecast errors include turning points in recessions, shifts in productivity trends, changes in oil prices, and persistent declines in interest rates.
CBO’s health insurance simulation model (HISIM) generates estimates of health insurance coverage and premiums for the population under age 65. HISIM is used to help develop baseline projections (which incorporate the assumption that current law generally remains the same) and also to model proposed changes in policies that affect health insurance coverage.
Currently, CBO is developing and testing a new version of HISIM to respond to continued Congressional interest in understanding the effects of legislative proposals that significantly affect health insurance coverage. The new model will be used to help develop CBO’s spring 2019 baseline projections and subsequent cost estimates.
Presentation by Jessica Banthin, Deputy Assistant Director in CBO’s Health, Retirement, and Long-Term Analysis Division (HRLD), and Alexandra Minicozzi, Chief of HRLD’s Health Insurance Modeling Unit, to CBO’s panel of health advisers.
The document discusses the federal budget and return of budget deficits in the United States. It notes that the federal budget deficit grew significantly from large surpluses in 2001 to large deficits in 2007 due to tax cuts, defense spending, and entitlement programs. The long-term fiscal outlook is challenging due to rising healthcare costs, aging of the population, and tax cuts. Reform of the US healthcare system is needed to control costs and address the growing budget imbalance.
CBO’s new health insurance simulation model creates synthetic firms that mimic the real-world variations between firms to model employers’ decisions about whether to offer employment-based health insurance.
Presentation by Alexandra Minicozzi, a Unit Chief in CBO’s Health, Retirement, and Long-Term Analysis Division, at the 8th Annual Conference of the American Society of Health Economists.
CBO's analyses of the distribution of household income rely on the Census Bureau's Current Population Survey (CPS) for information about receipt of government transfers, particularly means-tested transfers. CPS respondents underreport their receipt of those transfers, and that underreporting has increased over the past few decades. This presentation shows how CBO adjusts for the underreporting of means-tested transfers in its distributional analyses.
CBO and the Joint Committee on Taxation use HISIM2 to estimate the major sources of health insurance coverage and associated premiums for the U.S. population under age 65.
HISIM2 is used in conjunction with other models (for example, those for related taxes, Medicaid, and Medicare) to develop baseline insurance coverage projections and their associated budgetary costs. It is also used to estimate the effects of proposed changes in policies that affect health insurance coverage.
CBO uses HISIM2 to model firms’ decisions to offer health insurance as well as households’ decisions to enroll in health insurance. Like all of CBO’s models, HISIM2 is regularly updated. This slide deck describes the analytical methods used in HISIM2 to model firms’ decisions in CBO’s baseline budget projections as of March 6, 2020.
Presentation by Alice Burns and Jaeger Nelson, analysts in CBO’s Budget Analysis Division and Macroeconomic Analysis Division, to the National Tax Association.
To prepare its spring 2019 baseline budget projections, CBO is using new sources of data as inputs and has completely revamped the way it models consumers’ and employers’ behavior. To that end, it has developed HISIM2, a new version of the model CBO uses to generate estimates of health insurance coverage and premiums for the population under age 65. The model is used in conjunction with other models to develop baseline budget projections (which incorporate the assumption that current law generally remains the same). It is also used to estimate the effects of proposed changes in policies that affect health insurance coverage.
HISIM2 incorporates new base data, including data from surveys and administrative data. It changes the way individuals and families are projected to choose among coverage options. And it changes the way firms are projected to take workers’ preferences into account when deciding whether to offer employment-based coverage.
1. The Congressional Budget Office (CBO) prepares annual economic forecasts that underlie its federal budget projections, including key variables like output growth, unemployment, inflation, interest rates, and wages.
2. CBO evaluates the accuracy of its economic forecasts every two years. Its measures include mean error to assess bias, root mean square error to measure accuracy, and two-thirds spread to illustrate typical error ranges.
3. CBO's forecasts tend to be slightly more accurate and less biased than the Administration's, and on par with the Blue Chip consensus forecasts. Major sources of forecast errors include turning points in recessions, shifts in productivity trends, changes in oil prices, and persistent declines in interest rates.
CBO’s health insurance simulation model (HISIM) generates estimates of health insurance coverage and premiums for the population under age 65. HISIM is used to help develop baseline projections (which incorporate the assumption that current law generally remains the same) and also to model proposed changes in policies that affect health insurance coverage.
Currently, CBO is developing and testing a new version of HISIM to respond to continued Congressional interest in understanding the effects of legislative proposals that significantly affect health insurance coverage. The new model will be used to help develop CBO’s spring 2019 baseline projections and subsequent cost estimates.
Presentation by Jessica Banthin, Deputy Assistant Director in CBO’s Health, Retirement, and Long-Term Analysis Division (HRLD), and Alexandra Minicozzi, Chief of HRLD’s Health Insurance Modeling Unit, to CBO’s panel of health advisers.
Presentation by Kathleen Burke, John McClelland, and Jennifer Shand, analysts in CBO’s Tax Analysis Division, to the National Association of Legislative Fiscal Offices.
This document summarizes a presentation given by Ben Hopkins of the Health Analysis Division to the International Microsimulation Association on December 2, 2021. The presentation discussed the methods used by the Congressional Budget Office (CBO) to construct synthetic firms in their health insurance microsimulation model HISIM2. Specifically, it described how CBO uses data from tax filings and health surveys to select traits like age, income, and health spending of synthetic coworkers for each individual modeled in HISIM2. This allows HISIM2 to realistically model employer decisions about offering health insurance based on the characteristics of their synthetic employee workforce.
HISIM2 is an updated version of the model CBO uses to generate estimates of health insurance coverage and premiums for people under age 65. The model is used along with other models to develop CBO’s baseline budget projections (which incorporate the assumption that current law generally remains the same). It is also used to estimate the effects of proposed changes in policies that affect health insurance coverage.
Presentation by Chris Adams, an analyst in CBO’s Health Analysis Division, to the Health Economics Seminar Cosponsored by Boston University, Harvard University, and the Massachusetts Institute of Technology.
CBO provides summaries of its health care analysis methods and recent work. It evaluates health care proposals using a 10-year horizon, examining insurance coverage, health care spending projections, and more. Recent reports analyzed the uninsured, health care prices, and single-payer proposals. CBO also provides cost estimates and scores legislation on issues like surprise billing, the ACA, Medicare expansions, and drug pricing. It describes how it uses modeling, behavior assumptions, and a 10-year window in its analyses.
Presentation by Chapin White, CBO's Deputy Director of Health Analysis, to the Leadership Fellowship Program at the National Hispanic Medical Association.
Presentation by Tamara Hayford, Chief of CBO’s Health Policy Studies Unit, at the Association for Public Policy Analysis & Management 2021 Annual Research Meeting.
The document discusses perspectives on the US national debt and health care costs. It notes that while the current national debt is 40% of GDP, it has been higher historically. It argues that economic growth through infrastructure investment can help reduce the debt. It also notes that rising health care costs, not entitlement programs, are the main fiscal problem. Health care spending has grown faster in the US than other nations in recent decades and threatens to absorb half the economy. Solutions require addressing the underlying health care cost crisis.
Phillip L. Swagel presented on the effects of recent legislation on the economy and budget at the American Economic Association Annual Meeting on January 7, 2022. The presentation analyzed the impact of pandemic-related legislation from March and April 2020 on GDP and the deficit. It found that this legislation increased GDP by 1.5-2.1 trillion and the deficit by 2.6 trillion from 2020 to 2023. The presentation also examined the estimated effects of the Build Back Better Act on the deficit, and projected growing deficits will drive federal debt to unprecedented levels over the next 30 years.
Presentation by Adebayo Adedeji and Heidi Golding, analysts in CBO's National Security Division, at the Annual Conference of the Western Economic Association International.
This document from the Congressional Budget Office provides additional information on CBO's 2013 long-term projections for Social Security. It finds that:
- Social Security outlays exceeded tax revenues for the first time in 2010 and CBO projects the gap will average 12% of tax revenues over the next decade as more baby boomers retire.
- The Disability Insurance trust fund is projected to be exhausted in 2017 and the Old-Age and Survivors Insurance trust fund in 2033, though combining the two the funds would be exhausted in 2031.
- The amount of taxes paid and benefits received through Social Security varies between groups based on earnings, with higher earners paying more in taxes but receiving proportionately lower replacement rates
Presentation by Heidi Golding, an analyst in CBO’s National Security Division, at the Southern Economic Association Annual Meeting.
In this presentation, CBO provides background information on the VA health care system and past spending and describes 10-year projections by CBO on VA health spending under three different scenarios. CBO finds that, under certain assumptions, future spending required to treat veterans may be substantially higher (in inflation-adjusted dollars) than recent appropriations.
The Congressional Budget Office (CBO) was created to provide the Congress with objective budget and economic analysis. CBO assists the Congress by developing baseline budgets and cost estimates of legislation. It publishes various reports and analyses to help inform budget and policy decisions. During the COVID-19 pandemic, CBO has increased the frequency of its releases and used new formats to quickly provide the Congress with relevant analysis.
This presentation explains how much the federal government spends on the major health care programs: Medicare, Medicaid, the Children’s Health Insurance Program, and marketplace subsidies and related expenditures. In 2018, about 155 million people were enrolled in those programs. CBO projects that net outlays for the programs will grow from about $1.0 trillion in 2018 to about $2.0 trillion in 2028.
Presentation by Jessica Banthin, Deputy Assistant Director in CBO’s Health, Retirement, and Long-Term Analysis Division, at the Alliance for Health Policy Summit on Health Care Costs in America.
This document is a presentation by Douglas Elmendorf, the Director of the Congressional Budget Office, about CBO's analysis of health care policy. It discusses CBO's objective, nonpartisan approach and how it analyzes the effects of policies on the federal budget, state budgets, costs for beneficiaries, and health care outcomes. It also examines key types of federal health care policies that CBO studies, such as ways to improve population health, cut federal subsidies, change how Medicare providers are paid, and make structural changes to programs like Medicare.
The document discusses how the Congressional Budget Office (CBO) uses analytic models and communicates its findings. The CBO provides objective analysis to Congress on budgets, spending, revenues, and legislation. It uses various types of models like spreadsheets, regression, and microsimulation to make projections. The CBO evaluates evidence, consults experts, and reviews its models. It disseminates methods, findings, and answers through reports, working papers, meetings, and visualizations to facilitate understanding.
This slide deck outlines the models CBO uses to assess the budgetary effects of alternative economic scenarios such as those presented in CBO’s Current View of the Economy in 2023 and 2024 and the Budgetary Implications (November 2022).
Presentation by Bilal Habib, an analyst in CBO’s Tax Analysis Division, to the Committee on National Statistics of the National Academy of Sciences, Engineering, and Medicine.
Presentation by Kathleen Burke, John McClelland, and Jennifer Shand, analysts in CBO’s Tax Analysis Division, to the National Association of Legislative Fiscal Offices.
This document summarizes a presentation given by Ben Hopkins of the Health Analysis Division to the International Microsimulation Association on December 2, 2021. The presentation discussed the methods used by the Congressional Budget Office (CBO) to construct synthetic firms in their health insurance microsimulation model HISIM2. Specifically, it described how CBO uses data from tax filings and health surveys to select traits like age, income, and health spending of synthetic coworkers for each individual modeled in HISIM2. This allows HISIM2 to realistically model employer decisions about offering health insurance based on the characteristics of their synthetic employee workforce.
HISIM2 is an updated version of the model CBO uses to generate estimates of health insurance coverage and premiums for people under age 65. The model is used along with other models to develop CBO’s baseline budget projections (which incorporate the assumption that current law generally remains the same). It is also used to estimate the effects of proposed changes in policies that affect health insurance coverage.
Presentation by Chris Adams, an analyst in CBO’s Health Analysis Division, to the Health Economics Seminar Cosponsored by Boston University, Harvard University, and the Massachusetts Institute of Technology.
CBO provides summaries of its health care analysis methods and recent work. It evaluates health care proposals using a 10-year horizon, examining insurance coverage, health care spending projections, and more. Recent reports analyzed the uninsured, health care prices, and single-payer proposals. CBO also provides cost estimates and scores legislation on issues like surprise billing, the ACA, Medicare expansions, and drug pricing. It describes how it uses modeling, behavior assumptions, and a 10-year window in its analyses.
Presentation by Chapin White, CBO's Deputy Director of Health Analysis, to the Leadership Fellowship Program at the National Hispanic Medical Association.
Presentation by Tamara Hayford, Chief of CBO’s Health Policy Studies Unit, at the Association for Public Policy Analysis & Management 2021 Annual Research Meeting.
The document discusses perspectives on the US national debt and health care costs. It notes that while the current national debt is 40% of GDP, it has been higher historically. It argues that economic growth through infrastructure investment can help reduce the debt. It also notes that rising health care costs, not entitlement programs, are the main fiscal problem. Health care spending has grown faster in the US than other nations in recent decades and threatens to absorb half the economy. Solutions require addressing the underlying health care cost crisis.
Phillip L. Swagel presented on the effects of recent legislation on the economy and budget at the American Economic Association Annual Meeting on January 7, 2022. The presentation analyzed the impact of pandemic-related legislation from March and April 2020 on GDP and the deficit. It found that this legislation increased GDP by 1.5-2.1 trillion and the deficit by 2.6 trillion from 2020 to 2023. The presentation also examined the estimated effects of the Build Back Better Act on the deficit, and projected growing deficits will drive federal debt to unprecedented levels over the next 30 years.
Presentation by Adebayo Adedeji and Heidi Golding, analysts in CBO's National Security Division, at the Annual Conference of the Western Economic Association International.
This document from the Congressional Budget Office provides additional information on CBO's 2013 long-term projections for Social Security. It finds that:
- Social Security outlays exceeded tax revenues for the first time in 2010 and CBO projects the gap will average 12% of tax revenues over the next decade as more baby boomers retire.
- The Disability Insurance trust fund is projected to be exhausted in 2017 and the Old-Age and Survivors Insurance trust fund in 2033, though combining the two the funds would be exhausted in 2031.
- The amount of taxes paid and benefits received through Social Security varies between groups based on earnings, with higher earners paying more in taxes but receiving proportionately lower replacement rates
Presentation by Heidi Golding, an analyst in CBO’s National Security Division, at the Southern Economic Association Annual Meeting.
In this presentation, CBO provides background information on the VA health care system and past spending and describes 10-year projections by CBO on VA health spending under three different scenarios. CBO finds that, under certain assumptions, future spending required to treat veterans may be substantially higher (in inflation-adjusted dollars) than recent appropriations.
The Congressional Budget Office (CBO) was created to provide the Congress with objective budget and economic analysis. CBO assists the Congress by developing baseline budgets and cost estimates of legislation. It publishes various reports and analyses to help inform budget and policy decisions. During the COVID-19 pandemic, CBO has increased the frequency of its releases and used new formats to quickly provide the Congress with relevant analysis.
This presentation explains how much the federal government spends on the major health care programs: Medicare, Medicaid, the Children’s Health Insurance Program, and marketplace subsidies and related expenditures. In 2018, about 155 million people were enrolled in those programs. CBO projects that net outlays for the programs will grow from about $1.0 trillion in 2018 to about $2.0 trillion in 2028.
Presentation by Jessica Banthin, Deputy Assistant Director in CBO’s Health, Retirement, and Long-Term Analysis Division, at the Alliance for Health Policy Summit on Health Care Costs in America.
This document is a presentation by Douglas Elmendorf, the Director of the Congressional Budget Office, about CBO's analysis of health care policy. It discusses CBO's objective, nonpartisan approach and how it analyzes the effects of policies on the federal budget, state budgets, costs for beneficiaries, and health care outcomes. It also examines key types of federal health care policies that CBO studies, such as ways to improve population health, cut federal subsidies, change how Medicare providers are paid, and make structural changes to programs like Medicare.
The document discusses how the Congressional Budget Office (CBO) uses analytic models and communicates its findings. The CBO provides objective analysis to Congress on budgets, spending, revenues, and legislation. It uses various types of models like spreadsheets, regression, and microsimulation to make projections. The CBO evaluates evidence, consults experts, and reviews its models. It disseminates methods, findings, and answers through reports, working papers, meetings, and visualizations to facilitate understanding.
This slide deck outlines the models CBO uses to assess the budgetary effects of alternative economic scenarios such as those presented in CBO’s Current View of the Economy in 2023 and 2024 and the Budgetary Implications (November 2022).
Presentation by Bilal Habib, an analyst in CBO’s Tax Analysis Division, to the Committee on National Statistics of the National Academy of Sciences, Engineering, and Medicine.
CBO describes how it projects corporate income tax revenues, focusing on how it maps economic projections of corporate profits to projections of the corporate income tax base.
CONGRESS OF THE UNITED STATESCONGRESSIONAL BUDGET OFFICEAlleneMcclendon878
CONGRESS OF THE UNITED STATES
CONGRESSIONAL BUDGET OFFICE
CBO
Social Security
Policy Options
JULY 2010
Pub. No. 4140
A
S T U D Y
CBO
Social Security Policy Options
July 2010
The Congress of the United States O Congressional Budget Office
CBO
Notes
Unless otherwise noted, all years are calendar years.
Numbers in the text and tables may not add up to totals because of rounding.
Preface
Social Security is the federal government’s largest single program, and as the
U.S. population grows older in the coming decades, its cost is projected to increase more
rapidly than its revenues. As a result, under current law, resources dedicated to the program
will become insufficient to pay full benefits in 2039, the Congressional Budget Office (CBO)
projects. Long-run sustainability for the program could be attained through various
combinations of raising taxes and cutting benefits; such changes would also affect the
Social Security taxes paid and the benefits received by various groups of people. This CBO
study examines a variety of approaches to changing Social Security, updating an earlier work,
Menu of Social Security Options, which CBO published in May 2005. In keeping with CBO’s
mandate to provide objective, impartial analysis, the current study makes no
recommendations.
The study was written by Noah Meyerson, Charles Pineles-Mark, and Michael Simpson of
CBO’s Health and Human Resources Division, under the direction of Joyce Manchester and
Bruce Vavrichek. Research assistance was provided by Philip Armour, Sarah Axeen, and
L. Daniel Muldoon. James Baumgardner, Sheila Dacey, Benjamin Page, David Rafferty,
Jonathan Schwabish, and Julie Topoleski provided helpful comments on earlier drafts.
Andrew Biggs of the American Enterprise Institute and Paul Van de Water of the Center for
Budget and Policy Priorities also provided useful comments. (The assistance of external
reviewers implies no responsibility for the final product, which rests solely with CBO.)
Kate Kelly edited the manuscript, and Leah Mazade and Sherry Snyder proofread it.
Maureen Costantino took the cover photograph and designed the cover, and Jeanine Rees
prepared the study for publication. Jonathan Schwabish provided help with graphics.
Monte Ruffin produced the initial printed copies, Linda Schimmel coordinated the print
distribution, and Simone Thomas prepared the electronic version for CBO’s Web site
(www.cbo.gov).
Douglas W. Elmendorf
Director
July 2010
CBO
www.cbo.gov
http://www.cbo.gov/doc.cfm?index=6377
MaureenC
Doug Elmendorf
Contents
Summary ix
Introduction 1
An Overview of Social Security 1
Social Security Projections 4
Assessing Options for Changing Social Security 7
Key Elements of Social Security 8
Scope of the Options 9
Effects of the Options on the System’s Finances 11
Effects of the Options on Payroll Taxes Paid and Benefits Received by
Various Groups 13
Effects of the Options on Work and Saving 15
Options That Wo ...
Employer Employee linked data in Italy availability and usage by institusionsStructuralpolicyanalysis
This document summarizes an employer-employee linked data system in Italy called ASIA-Employment. It contains the following key points:
1. ASIA-Employment was created using administrative data from 20 sources to reproduce census data on employment. It contains information on over 15 million workers and 4 million companies.
2. The data includes characteristics of workers, jobs, enterprises and their industry/location. It allows tracking of worker and job flows over time.
3. The data is used by government models to analyze policies and their effects. It can evaluate costs of programs and measure consumption behavior changes from tax policies.
The director testified about trends in federal tax revenues and rates. Key points include:
- Revenues have averaged 18% of GDP over the past 40 years, ranging from 15-21%. Individual income and payroll taxes make up most revenues.
- Marginal tax rates have declined since the 1950s-1980s but remain higher for higher incomes. Tax expenditures subsidize activities like homeownership and health insurance.
- Taxes are progressive on average but top earners now earn over half of income and pay nearly 70% of taxes, up from 1979 levels. Lower tax rates can boost work and saving but also increase deficits long-term.
CBO provides 10-year budget and economic projections to Congress. These projections are based on current law and incorporate CBO's economic forecasts. CBO uses several models and conducts extensive review to develop its economic forecasts. CBO then uses the economic forecasts to construct its baseline budget projections, which project spending, revenues, deficits and debt under current law. CBO's projections show deficits rising significantly over the next 10 years, increasing federal debt held by the public to its highest levels since World War II.
The Congressional Budget Office (CBO) provides Congress with budget and economic analyses. The CBO develops a baseline budget projection using its economic forecast and assuming current laws remain in place. The baseline includes projections for mandatory spending, discretionary spending, revenues, interest costs, deficits, and federal debt over 10 years. The CBO's current baseline projects that deficits will increase in coming years, federal debt will rise significantly, and debt held by the public will reach 96% of GDP by 2028 under current law.
CBO’s analyses of the distribution of household income and federal taxes are based on administrative tax data from the Internal Revenue Service’s Statistics of Income (SOI) and on household survey data from the Census Bureau’s Current Population Survey (CPS). CPS respondents tend to underreport their receipt of government transfers, and the level of underreporting has increased over time. Any CPS-based analysis of the income distribution that does not correct for that underreporting will probably underestimate income growth at the bottom of the distribution and the role of government transfers in reducing income inequality.
In this presentation, CBO outlines a method to correct for underreporting in several transfer programs from 1979 through 2013 and examines the distributional effects of those corrections. The information is preliminary and is being circulated to stimulate discussion and critical comment.
Presentation by Bilal Habib, an analyst in CBO’s Tax Analysis Division, at a Washington Center for Equitable Growth workshop on distributional national accounts.
The Budget and Economic Outlook is one of the flagship publications of the Congressional Budget Office. The report provides economic and federal budget projections that incorporate the assumption that current laws governing federal spending and revenues generally remain in place. Those baseline projections cover the 10-year period used in the Congressional budget process. The report generally describes the differences between the current projections and previous ones; compares the economic forecast with those of other forecasters; and shows the budgetary impact of some alternative policy assumptions. This presentation describes how the report is produced and how it can be used for economic analysis, providing examples from the April 2018 edition.
Presentation by Jeffrey F. Werling, Assistant Director of CBO’s Macroeconomic Analysis Division, to the National Association of Forensic Economics, at the Southern Economic Association Annual Meetings, November 18, 2018.
As part of its mandate to provide nonpartisan analyses to the Congress, CBO produces baseline projections for the economy and the federal budget. Those projections are used in CBO’s cost estimates for proposed federal legislation and in CBO’s analytical reports. This presentation describes how CBO produces its baseline projections.
Presentation by Theresa Gullo, CBO’s Assistant Director for Budget Analysis, and John McClelland, CBO’s Assistant Director for Tax Analysis, at a joint seminar with the Congressional Research Service.
Presentation by CBO analysts Rebecca Heller, Shannon Mok, and James Pearce, and Census Bureau research economist Jonathan Rothbaum at the American Economic Association Annual Meeting, Committee on Economic Statistics.
BEPS filing requirements for multinationals under country by country reportingPaul Authachinda
BEPS FILING REQUIREMENTS FOR MULTINATIONALS UNDER COUNTRY BY COUNTRY REPORTING. An MNE’s CbC report should include detailed financial and tax information
relating to the global allocation of its income and taxes. CbCR is required where the ultimate parent company has its tax residence.
Presentation by Theresa Gullo, CBO's Director of Budget Analysis, to the Organisation for Economic Co-operation and Development's Committee of Senior Budget Officials.
To support the Congressional budget process, CBO provides the Congress with objective, nonpartisan, and timely analyses of legislative proposals and of budgetary and economic issues. This presentation highlights CBO’s process for developing its economic forecast and baseline budget projections and provides an overview of the current forecast and projections.
Presentation by Robert Arnold, Chief of the Projections Unit in CBO’s Macroeconomic Analysis Division, and Christina Hawley Anthony, Chief of the Projections Unit in CBO’s Budget Analysis Division, at the NABE Foundation’s 15th Annual Economic Measurement Seminar.
Presentation by Julie Topoleski, Chief of the Long-Term Analysis Unit in CBO’s Health, Retirement, and Long-Term Analysis Division, to the Social Security Advisory Board.
Both CBO and the Social Security Trustees project a shortfall in Social Security’s finances, but they differ in their assessment of its magnitude. This presentation describes that difference and the major factors that contribute to it.
National income is important to measure a country's economic performance, growth, composition and structure. It helps governments formulate development plans and policies and helps producers forecast demand. National income represents the total value of all final goods and services produced domestically during a year, including net income from abroad. It is calculated using product, income and expenditure methods. India's national income estimation evolved from individual studies to an official Central Statistical Organization that regularly revises estimation methods and base years. Key difficulties include non-monetized sectors and lack of reliable statistical data.
CBO projects that federal revenues will increase by 3 percent of GDP over the next 30 years. Real bracket creep—when people’s income rises faster than the tax brackets and other elements of the tax system—accounts for about half of that increase.
CBO supports the Congressional budget process by providing the Congress with objective, nonpartisan, and timely analyses of legislative proposals and of budgetary and economic issues. From a macroeconomic perspective, CBO produces work in two areas. First, it provides baseline economic forecasts over 10- and 30-year projection windows. Second, it analyzes the short-term and longer-term effects on the overall economy of some proposed changes in federal tax and spending policies. This presentation describes that work and provides recent examples of forecasts and analysis.
Similar to An Overview of CBO’s Microsimulation Tax Model (20)
Presentation by Julie Topoleski, CBO’s Director of Labor, Income Security, and Long-Term Analysis, at the 16th Annual Meeting of the OECD Working Party of Parliamentary Budget Officials and Independent Fiscal Institutions.
Presentation by Rebecca Sachs and Joshua Varcie, analysts in CBO’s Health Analysis Division, at the 13th Annual Conference of the American Society of Health Economists.
Presentation by Jared Jageler, David Adler, Noelia Duchovny, and Evan Herrnstadt, analysts in CBO’s Microeconomic Studies and Health Analysis Divisions, at the Association of Environmental and Resource Economists Summer Conference.
Presentation by Mark Hadley, CBO's Chief Operating Officer and General Counsel, at the 2nd NABO-OECD Annual Conference of Asian Parliamentary Budget Officials.
Presentation by Daria Pelech, an analyst in CBO’s Health Analysis Division, at the Center for Health Insurance Reform McCourt School of Public Policy, Georgetown University.
This slide deck highlights CBO’s key findings about the outlook for the economy as described in its new report, The Budget and Economic Outlook: 2024 to 2034.
Presentation by Eric J. Labs, an analyst in CBO’s National Security Division, at the Bank of America 2024 Defense Outlook and Commercial Aerospace Forum.
Presentation by Elizabeth Ash, William Carrington, Rebecca Heller, and Grace Hwang of CBO’s Labor, Income Security, and Long-Term Analysis and Health Analysis divisions to the Children’s Health Group, American Academy of Pediatrics.
Jennifer Schaus and Associates hosts a complimentary webinar series on The FAR in 2024. Join the webinars on Wednesdays and Fridays at noon, eastern.
Recordings are on YouTube and the company website.
https://www.youtube.com/@jenniferschaus/videos
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The Power of Community Newsletters: A Case Study from Wolverton and Greenleys...Scribe
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The engaging history and evolution of Wolverton and Greenleys Town Council's newsletter
Strategies for producing a successful community newsletter and generating income through advertising
The decision-making process behind moving newsletter design from in-house to outsourcing and its impacts
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3. 2
CBO
Purposes of the Model
Revenue forecasts: projections of individual income and payroll taxes
under current law for CBO’s Budget and Economic Outlook and Long-
Term Budget Outlook.
Distributional estimates: estimates of how income taxes and payroll
taxes are distributed among taxpayers at different income levels.
Macroeconomic analyses: estimates of how tax and transfer policies
affect people’s incentives to work and save—and how those behaviors,
in turn, affect the broader economy.
The model is not used to estimate the effects of legislative changes to the individual income and payroll tax systems. Those
cost estimates are produced by the staff of the Joint Committee on Taxation.
4. 3
CBO
The Microsimulation Modeling Approach
Microsimulation modeling applies the rules of the tax system to each
member of a representative sample of taxpayers.
The microsimulation modeling approach has several advantages:
• It models all of the interactions in a complex tax system.
• It provides more flexibility than time-series forecasting techniques,
which rely on past trends (despite frequent changes in tax law) to
extrapolate future tax revenues.
• It performs simulations using individual-level data, which makes it
possible to examine subgroups of the population, such as low-
income earners or families with children.
• It allows analysts to evaluate how hypothetical changes to the tax
system would affect total tax revenues and the distribution of taxes.
5. 4
CBO
The Structure of the Model
The model has three core components:
– Several data preparation routines, which allow CBO to supplement
primary data from tax returns with data from other sources;
– A projection algorithm, which projects the future tax base by
adjusting data from past years for expected demographic and
economic changes; and
– A tax calculator, which estimates taxes by applying tax rules to
projected tax base.
Additional modules allow the model to do more than project taxes:
– Transfer calculators, which can simulate the effects of certain
transfer programs;
– Marginal rate calculators, which estimate the proportion of additional
income paid in taxes (accounting for income and payroll tax rates as
well as the phasing out of certain deductions and credits); and
– Labor supply calculators, which estimate how people change the
amount they work in response to tax changes.
7. 6
CBO
Primary Data
The Statistics of Income (SOI) individual income tax file provides the
primary data used by the tax model:
– The SOI comprises a large sample of tax returns, with more than
300,000 records;
– It contains all the variables needed to estimate income taxes,
including most elements on tax returns, with additional detail on
high-income tax returns; and
– It is administratively verified.
However, the SOI has some limitations:
– It contains limited demographic information and no information on
nontaxable income or people who do not file;
– It is available only with significant lags—roughly 1.5 years after the
end of the tax year; and
– Its use is limited by statute.
The tax model can also use the public-use version of the SOI or the Current Population Survey, with different data
preparation routines. Those alternative data sources, however, produce less accurate estimates.
8. 7
CBO
Because the primary tax return data do not provide all of the information
necessary to project the future tax base, CBO uses data from other
sources to impute, or fill in, the missing information.
Supplementary Data
Data Preparation Routine and Source Imputed Information
Directly match to third-party forms filed with
the IRS, including Forms W-2 and 1099
• Nontaxable Social Security benefits
• Split of earnings between married spouses
• Contributions to deferred compensation
plans
Statistically match to the Current Population
Survey
• Estimates of transfer income
• Estimates of the population that does not
file tax returns
Tabulate data from CBO’s Health Insurance
Simulation model
• Estimates of employer-sponsored health
insurance premiums
Tabulate data from the Survey of Consumer
Finances and the Consumer Expenditure
Survey
• Potential value of itemized deductions for
non-itemizers
10. 9
CBO
Projecting the Future Tax Base:
A Multistep Process
Analyzing the future effects of the income tax system requires data that
represent the expected demographic and economic characteristics of the
filing population.
To simulate the expected evolution of those characteristics, the model:
– adjusts the weights of the tax returns in the sample to reflect
expected changes in population and employment, and
– adjusts the values of the various income items to reflect expected
growth in income.
Population Employment Presence of
Income
Income
Totals
Income
Distribution
1 2 3 4 5
11. 10
CBO
Step 1: Population
The Congressional Budget Office Long-Term model provides projections
of the population by age, sex, and marital status.
The tax model uses the projected growth rates for each demographic
group to create weight adjustment factors, which are applied to the tax
model’s population so that its growth and composition match the long-
term model’s projections.
Married couples filing jointly are one tax unit for the purposes of the
individual income tax and need only one weight adjustment—the
average weight adjustment for the two spouses.
Population
1 2 3 4 5
12. 11
CBO
Step 2: Employment
CBO’s Macroeconomic Analysis Division provides a forecast of
aggregate employment.
The tax model creates weight adjustment factors so that the number of
future workers in the model matches projected growth in aggregate
employment. The demographic characteristics of the population are
unchanged.
Population Employment
1 2 3 4 5
13. 12
CBO
Step 3: Presence of Certain Income Sources
CBO’s Health, Retirement, and Long-Term Analysis Division and Budget
Analysis Division generate target numbers of people with income from
certain sources, such as employer-sponsored health insurance and
unemployment insurance.
The tax model probabilistically assigns each form of income to the target
number of tax returns.
Population Employment
1 2 3 4 5
Presence of
Income
14. 13
CBO
Step 4: Income Totals
The national income and product accounts are official U.S. accounts that track the amount and composition of gross
domestic product, the prices of its components, and the way in which the costs of production are distributed as income.
CBO’s Macroeconomic Analysis Division provides a forecast of income
sources that are part of national income (as defined in the national
income and product accounts).
CBO’s Tax Analysis and Budget Analysis Divisions provide forecasts for
some other income sources that are not part of national income, such as
capital gains realizations.
The tax model increases taxable income from each source at the same
rate as its analog in the macroeconomic forecast by applying a uniform
adjustment to each return in the sample.
Population Employment Income
Totals
1 2 3 4 5
Presence of
Income
15. 14
CBO
Growth in Taxable Income: Data Sources
Component of Taxable
Income
Data Source for Projected Growth Rates
Wages and salaries Macroeconomic forecast of wage and salary disbursements,
with adjustments for nontaxable employee contributions for
fringe benefits
Interest and dividends Macroeconomic forecast of monetary interest and personal
dividend income
Business income
(Schedule C and E)
Macroeconomic forecast of proprietors’ income and corporate
profits
Taxable pension and IRA
distributions
Tax Analysis Division forecast
Capital gains realizations Tax Analysis Division forecast
Social Security and
unemployment
insurance benefits
Budget Analysis Division forecast
Itemized deductions Extrapolations from total income for each return in the sample
16. 15
CBO
Step 5: Income Distribution
The projection algorithm holds the distribution of most income sources
roughly constant by applying the same growth rate to each return in the
sample.
Wages are the exception: The share of wages for the highest earners is
estimated using a time-series regression.
The distribution of overall income will change over time because the
different income sources grow differentially.
Population Employment Income
Totals
Income
Distribution
1 2 3 4 5
Presence of
Income
17. 16
CBO
Sources: Congressional Budget Office, using data from Kopczuk, Saez, and Song (2010) and the Social Security Administration.
Estimates for 1978 to 1989 are based on tabulations of individual earnings records drawn from Wojciech Kopczuk, Emmanuel Saez,
and Jae Song, “Earnings Inequality and Mobility in the United States: Evidence From Social Security Data Since 1937,” Quarterly
Journal of Economics, vol. 125, no. 1 (February 2010), pp. 91–128, http://dx.doi.org/10.1162/qjec.2010.125.1.91.
Estimates for 1990 to 2016 are based on earnings as reported by employers on Internal Revenue Service Forms W-2 and tabulated by
the Social Security Administration, “Social Security Online, Automatic Increases: Wage Statistics for 2016” (accessed September 16,
2017), www.ssa.gov/cgi-bin/netcomp.cgi?year=2016.
To account for differences in the methods used to generate the two sets of data, CBO adjusted the 1978–1989 estimates to reflect the
average difference in years for which data were available for both series (1990–2004).
Historical and Projected Share of Wages Earned
by the Top 1 Percent of Earners
0
2
4
6
8
10
12
14
16
1978 1983 1988 1993 1998 2003 2008 2013 2018 2023
Historical Projected
18. 17
CBO
Adjusted gross income comprises income from many sources, including wages and salaries, interest, dividends, capital gains
realizations, business income, and some pension and Social Security income.
For additional data and explanatory notes, see Table 3, “Individual Income Tax Baseline Detail in CBO's April 2018 Baseline,”
in “Revenue Projections, by Category” (April 2018), www.cbo.gov/about/products/budget-economic-data#7.
Projected Distribution of Adjusted Gross Income,
by Income Group
Income Group
Calendar Year
2016 2017 2018 2019 2020
Top 1 Percent 20.1 20.9 21.2 21.5 21.3
Top 5 Percent 35.9 36.7 37.0 37.4 37.2
Top 10 Percent 47.6 48.3 48.5 48.8 48.7
Top 25 Percent 69.9 70.3 70.3 70.5 70.4
Top 50 Percent 89.7 89.8 89.6 89.7 89.6
20. 19
CBO
The Microsimulation Model’s Tax Calculator
The core of the model is an income and payroll tax calculator, which can
simulate the effects of past and future tax laws.
– The calculator represents most values in tax law (such as tax
brackets and the value of the standard deduction) with easily
changeable parameters.
– The calculator also accounts for the effects of certain government
transfers, including Medicare Part B premiums and Supplemental
Nutrition Assistance Program benefits.
– Estimated tax liabilities for the current year are compared with
taxpayers’ actual liabilities to verify the accuracy of the
computations.
– The calculator generally estimates the change in taxes before
taxpayers adjust their behavior.
– Most behavioral estimates are produced with other tools, but the
calculator is used to estimate some simple tax-minimizing behavior
(such as choosing whether to claim the standard deduction or
itemized deductions) and the effect of tax laws on the labor supply.
21. 20
CBO
For additional data and explanatory notes, see Table 3, “Individual Income Tax Baseline Detail in CBO's April 2018 Baseline,”
in “Revenue Projections, by Category” (April 2018), www.cbo.gov/about/products/budget-economic-data#7.
Individual Income Tax Details
From CBO's April 2018 Baseline
Calendar Year
Billions of Dollars 2016 2017 2018 2019 2020
Calculation of Adjusted Gross Income
Salaries and wages 7,320 7,550 7,964 8,436 8,854
Taxable interest and ordinary dividends (excludes qualified dividends) 157 162 170 184 201
Qualified dividends 192 192 204 222 235
Capital gain or loss 631 821 905 947 907
Net business income (all income and loss reported on Schedule C, E, and F) 1,052 1,071 1,042 1,122 1,190
Taxable pensions and annuities and IRA distributions 962 1,051 1,125 1,188 1,241
Taxable Social Security benefits 289 312 338 369 399
All other sources of income -83 -87 -94 -136 -141
Total income 10,520 11,072 11,654 12,332 12,886
Subtract statutory adjustments 153 154 156 166 175
Adjusted gross income 10,368 10,918 11,567 12,242 12,795
Calculation of Taxable Income
Subtract Personal Exemption amount (before limit) 1,194 1,205 0 0 0
Subtract Standard deduction (non-itemizers only) 909 925 2,356 2,412 2,441
Subtract Total itemized deductions (itemizers only) 1,354 1,401 869 948 1,080
Total exemptions and deductions after limits 3,384 3,450 3,109 3,228 3,368
Taxable income 7,452 7,932 8,886 9,455 9,887
Calculation of Income Tax Liability
Total income tax (including alternative minimum tax) before credits 1,531 1,635 1,627 1,748 1,840
Total credits (refundable and nonrefundable) 172 174 248 253 256
Income tax after credits 1,459 1,562 1,498 1,615 1,704
Net investment income tax 20 25 27 29 29
Individual income tax liability 1,479 1,587 1,525 1,643 1,733
22. 21
CBO
Revenue forecasts:
– The Budget and Economic Outlook: 2018 to 2028 (April 2018),
www.cbo.gov/publication/53651.
– The 2017 Long-Term Budget Outlook (March 2017),
www.cbo.gov/publication/52480.
Distributional estimates:
– The Distribution of Household Income, 2014 (March 2018),
www.cbo.gov/publication/53597.
– The Distribution of Major Tax Expenditures in the Individual Income
Tax System (May 2013), www.cbo.gov/publication/43768.
Examples of CBO Analyses Using the
Microsimulation Model
23. 22
CBO
Analyses of the macroeconomic effects of changes to tax policy:
– “Appendix B: The Effects of the 2017 Tax Act on CBO’s Economic
and Budget Projections,” in The Budget and Economic Outlook:
2018 to 2028 (April 2018), pp. 105–130,
www.cbo.gov/publication/53651.
– How CBO Estimates the Effects of the Affordable Care Act on the
Labor Market (December 2015), www.cbo.gov/publication/51065.
Analyses of marginal tax rates:
– Taxing Capital Income: Effective Marginal Tax Rates Under 2014
Law and Selected Policy Options (December 2016),
www.cbo.gov/publication/49817.
– Effective Marginal Tax Rates for Low- and Moderate-Income
Workers (November 2012), www.cbo.gov/publication/50923.
Examples of CBO Analyses Using the
Microsimulation Model (Continued)
24. 23
CBO
These slides were prepared to enhance the transparency of the work of
the Congressional Budget Office and to encourage external review of that
work. In keeping with CBO’s mandate to provide objective, impartial
analysis, this document makes no recommendations.
Ed Harris composed this document and Christine Browne edited it. An
electronic version is available on CBO’s website
(www.cbo.gov/publication/54096).
About This Document