Recipe 2: Estimating Behavioral Response to Reform#
This is an advanced recipe that should be followed only after mastering the basic recipe. This recipe shows how to analyze the behavioral responses to a tax reform using the Behavioral-Responses behresp package.
import sys
if 'google.colab' in sys.modules:
!pip install -q condacolab &> /dev/null # dev/null suppresses output
import condacolab
condacolab.install()
import taxcalc as tc
import behresp
# use publicly-available CPS input file
recs = tc.Records.cps_constructor()
# specify baseline Calculator object representing current-law policy
pol = tc.Policy()
calc1 = tc.Calculator(policy=pol, records=recs)
CYR = 2020
# calculate aggregate current-law income tax liabilities for cyr
calc1.advance_to_year(CYR)
calc1.calc_all()
itax_rev1 = calc1.weighted_total('iitax')
# specify Calculator object for static analysis of reform policy
pol.implement_reform(tc.Policy.read_json_reform('github://PSLmodels:Tax-Calculator@master/docs/recipes/_static/reformA.json'))
calc2 = tc.Calculator(policy=pol, records=recs)
# calculate reform income tax liabilities for cyr under static assumptions
calc2.advance_to_year(CYR)
calc2.calc_all()
itax_rev2sa = calc2.weighted_total('iitax')
# specify assumed non-zero response-function substitution elasticity
response_elasticities = {'sub': 0.25}
# specify Calculator object for analysis of reform with behavioral responses
calc2 = tc.Calculator(policy=pol, records=recs)
calc2.advance_to_year(CYR)
_, df2br = behresp.response(calc1, calc2, response_elasticities)
# calculate reform income tax liabilities for CYR with behavioral response
itax_rev2br = (df2br['iitax'] * df2br['s006']).sum()
# print total income tax revenue estimates for CYR
# (estimates in billons of dollars)
print('{}_CURRENT_LAW_P__itax_rev($B)= {:.3f}'.format(CYR, itax_rev1 * 1e-9))
print('{}_REFORM_STATIC__itax_rev($B)= {:.3f}'.format(CYR, itax_rev2sa * 1e-9))
print('{}_REFORM_DYNAMIC_itax_rev($B)= {:.3f}'.format(CYR, itax_rev2br * 1e-9))
2020_CURRENT_LAW_P__itax_rev($B)= 764.231
2020_REFORM_STATIC__itax_rev($B)= 766.915
2020_REFORM_DYNAMIC_itax_rev($B)= 755.118
Create multi-year diagnostic tables for
baseline,
reform excluding behavioral responses, and
reform including behavioral responses
NUM_YEARS = 3 # number of diagnostic table years beginning with CYR
dtable1 = calc1.diagnostic_table(NUM_YEARS)
dtable2 = calc2.diagnostic_table(NUM_YEARS)
dvar_list3 = list()
year_list3 = list()
for year in range(CYR, CYR + NUM_YEARS):
calc1.advance_to_year(year)
calc2.advance_to_year(year)
_, df2br = behresp.response(calc1, calc2, response_elasticities)
dvar_list3.append(df2br)
year_list3.append(year)
dtable3 = tc.create_diagnostic_table(dvar_list3, year_list3)
Diagnostic table for baseline:
dtable1
2020 | 2021 | 2022 | |
---|---|---|---|
Returns (#m) | 204.480 | 207.080 | 209.660 |
AGI ($b) | 11573.238 | 13174.913 | 13543.810 |
Itemizers (#m) | 27.730 | 32.030 | 31.210 |
Itemized Deduction ($b) | 752.189 | 880.850 | 883.139 |
Standard Deduction Filers (#m) | 176.750 | 175.050 | 178.450 |
Standard Deduction ($b) | 3075.468 | 3066.738 | 3229.828 |
Personal Exemption ($b) | 0.000 | 0.000 | 0.000 |
Taxable Income ($b) | 8617.397 | 10058.553 | 10330.427 |
Regular Tax ($b) | 1505.334 | 1764.023 | 1837.027 |
AMT Income ($b) | 11012.668 | 12516.075 | 12879.780 |
AMT Liability ($b) | 0.568 | 1.854 | 1.056 |
AMT Filers (#m) | 0.090 | 0.340 | 0.220 |
Tax before Credits ($b) | 1505.902 | 1765.877 | 1838.083 |
Refundable Credits ($b) | 654.861 | 827.137 | 98.469 |
Nonrefundable Credits ($b) | 99.385 | 0.005 | 107.717 |
Reform Surtaxes ($b) | 0.000 | 0.000 | 0.000 |
Other Taxes ($b) | 12.575 | 13.851 | 14.353 |
Ind Income Tax ($b) | 764.231 | 952.587 | 1646.250 |
Payroll Taxes ($b) | 1217.941 | 1318.728 | 1421.579 |
Combined Liability ($b) | 1982.172 | 2271.315 | 3067.829 |
With Income Tax <= 0 (#m) | 135.170 | 127.670 | 96.120 |
With Combined Tax <= 0 (#m) | 98.150 | 97.690 | 67.860 |
UBI Benefits ($b) | 0.000 | 0.000 | 0.000 |
Total Benefits, Consumption Value ($b) | 3617.042 | 3992.973 | 4069.559 |
Total Benefits Cost ($b) | 3617.042 | 3992.973 | 4069.559 |
Diagnostic table for reform, excluding behavioral responses:
dtable2
2020 | 2021 | 2022 | |
---|---|---|---|
Returns (#m) | 204.480 | 207.080 | 209.660 |
AGI ($b) | 11573.238 | 13174.913 | 13543.810 |
Itemizers (#m) | 27.660 | 31.890 | 31.100 |
Itemized Deduction ($b) | 749.755 | 877.454 | 879.840 |
Standard Deduction Filers (#m) | 176.820 | 175.180 | 178.570 |
Standard Deduction ($b) | 3076.756 | 3068.804 | 3231.739 |
Personal Exemption ($b) | 375.177 | 382.451 | 403.231 |
Taxable Income ($b) | 8369.678 | 9795.135 | 10056.427 |
Regular Tax ($b) | 1505.655 | 1768.154 | 1843.713 |
AMT Income ($b) | 11014.938 | 12519.258 | 12882.873 |
AMT Liability ($b) | 0.585 | 1.969 | 1.140 |
AMT Filers (#m) | 0.090 | 0.360 | 0.240 |
Tax before Credits ($b) | 1506.241 | 1770.123 | 1844.853 |
Refundable Credits ($b) | 658.196 | 827.137 | 102.144 |
Nonrefundable Credits ($b) | 93.705 | 0.002 | 102.093 |
Reform Surtaxes ($b) | 0.000 | 0.000 | 0.000 |
Other Taxes ($b) | 12.575 | 13.851 | 14.353 |
Ind Income Tax ($b) | 766.915 | 956.835 | 1654.969 |
Payroll Taxes ($b) | 1217.941 | 1318.728 | 1421.579 |
Combined Liability ($b) | 1984.856 | 2275.563 | 3076.548 |
With Income Tax <= 0 (#m) | 137.340 | 129.930 | 98.740 |
With Combined Tax <= 0 (#m) | 98.910 | 98.580 | 68.590 |
UBI Benefits ($b) | 0.000 | 0.000 | 0.000 |
Total Benefits, Consumption Value ($b) | 3617.042 | 3992.973 | 4069.559 |
Total Benefits Cost ($b) | 3617.042 | 3992.973 | 4069.559 |
Diagnostic table for reform, including behavioral responses:
dtable3
2020 | 2021 | 2022 | |
---|---|---|---|
Returns (#m) | 204.480 | 207.080 | 209.660 |
AGI ($b) | 11547.476 | 13141.721 | 13508.126 |
Itemizers (#m) | 27.630 | 31.870 | 31.080 |
Itemized Deduction ($b) | 748.521 | 875.915 | 878.239 |
Standard Deduction Filers (#m) | 176.850 | 175.210 | 178.590 |
Standard Deduction ($b) | 3077.317 | 3069.365 | 3232.212 |
Personal Exemption ($b) | 375.177 | 382.451 | 403.231 |
Taxable Income ($b) | 8344.171 | 9762.349 | 10021.353 |
Regular Tax ($b) | 1494.083 | 1753.849 | 1828.325 |
AMT Income ($b) | 10990.177 | 12487.384 | 12848.605 |
AMT Liability ($b) | 0.583 | 2.011 | 1.172 |
AMT Filers (#m) | 0.090 | 0.350 | 0.250 |
Tax before Credits ($b) | 1494.666 | 1755.861 | 1829.497 |
Refundable Credits ($b) | 657.905 | 827.116 | 101.876 |
Nonrefundable Credits ($b) | 93.933 | 0.002 | 102.342 |
Reform Surtaxes ($b) | 0.000 | 0.000 | 0.000 |
Other Taxes ($b) | 12.290 | 13.503 | 14.008 |
Ind Income Tax ($b) | 755.118 | 942.245 | 1639.286 |
Payroll Taxes ($b) | 1217.293 | 1317.690 | 1420.461 |
Combined Liability ($b) | 1972.410 | 2259.935 | 3059.747 |
With Income Tax <= 0 (#m) | 137.310 | 129.910 | 98.570 |
With Combined Tax <= 0 (#m) | 98.880 | 98.550 | 68.400 |
UBI Benefits ($b) | 0.000 | 0.000 | 0.000 |
Total Benefits, Consumption Value ($b) | 3617.042 | 3992.973 | 4069.559 |
Total Benefits Cost ($b) | 3617.042 | 3992.973 | 4069.559 |