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 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)= 764.170
2020_REFORM_STATIC__itax_rev($B)= 766.855
2020_REFORM_DYNAMIC_itax_rev($B)= 755.060
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 ($b) | 11573.238 | 13156.205 | 13723.185 |
| Itemizers (#m) | 27.730 | 32.030 | 31.220 |
| Itemized Deduction ($b) | 752.189 | 880.903 | 882.969 |
| Standard Deduction Filers (#m) | 176.750 | 175.050 | 178.440 |
| Standard Deduction ($b) | 3075.468 | 3066.702 | 3229.758 |
| Personal Exemption ($b) | 0.000 | 0.000 | 0.000 |
| Taxable Income ($b) | 8617.397 | 10040.159 | 10505.738 |
| Regular Tax ($b) | 1505.274 | 1760.905 | 1864.719 |
| AMT Income ($b) | 11012.668 | 12497.322 | 13059.342 |
| AMT Liability ($b) | 0.568 | 1.811 | 1.322 |
| AMT Filers (#m) | 0.090 | 0.330 | 0.250 |
| Tax before Credits ($b) | 1505.841 | 1762.716 | 1866.041 |
| Refundable Credits ($b) | 654.861 | 827.256 | 98.250 |
| Nonrefundable Credits ($b) | 99.385 | 0.005 | 107.651 |
| Reform Surtaxes ($b) | 0.000 | 0.000 | 0.000 |
| Other Taxes ($b) | 12.575 | 13.844 | 14.446 |
| Ind Income Tax ($b) | 764.170 | 949.299 | 1674.587 |
| Payroll Taxes ($b) | 1217.941 | 1318.728 | 1421.579 |
| Combined Liability ($b) | 1982.111 | 2268.028 | 3096.166 |
| With Income Tax <= 0 (#m) | 135.170 | 127.680 | 95.970 |
| With Combined Tax <= 0 (#m) | 98.150 | 97.700 | 67.730 |
| 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 | 13156.205 | 13723.185 |
| Itemizers (#m) | 27.660 | 31.890 | 31.110 |
| Itemized Deduction ($b) | 749.755 | 877.489 | 879.822 |
| Standard Deduction Filers (#m) | 176.820 | 175.180 | 178.560 |
| Standard Deduction ($b) | 3076.756 | 3068.785 | 3231.586 |
| Personal Exemption ($b) | 375.177 | 383.210 | 404.808 |
| Taxable Income ($b) | 8369.678 | 9776.270 | 10230.157 |
| Regular Tax ($b) | 1505.595 | 1764.964 | 1871.117 |
| AMT Income ($b) | 11014.938 | 12500.520 | 13062.305 |
| AMT Liability ($b) | 0.585 | 1.927 | 1.414 |
| AMT Filers (#m) | 0.090 | 0.350 | 0.270 |
| Tax before Credits ($b) | 1506.180 | 1766.891 | 1872.531 |
| Refundable Credits ($b) | 658.196 | 827.256 | 101.933 |
| Nonrefundable Credits ($b) | 93.705 | 0.002 | 102.012 |
| Reform Surtaxes ($b) | 0.000 | 0.000 | 0.000 |
| Other Taxes ($b) | 12.575 | 13.844 | 14.446 |
| Ind Income Tax ($b) | 766.855 | 953.478 | 1683.031 |
| Payroll Taxes ($b) | 1217.941 | 1318.728 | 1421.579 |
| Combined Liability ($b) | 1984.796 | 2272.206 | 3104.610 |
| With Income Tax <= 0 (#m) | 137.340 | 129.960 | 98.600 |
| With Combined Tax <= 0 (#m) | 98.910 | 98.600 | 68.450 |
| UBI Benefits ($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 ($b) | 11547.479 | 13123.042 | 13686.894 |
| Itemizers (#m) | 27.630 | 31.870 | 31.080 |
| Itemized Deduction ($b) | 748.521 | 875.970 | 878.204 |
| Standard Deduction Filers (#m) | 176.850 | 175.200 | 178.580 |
| Standard Deduction ($b) | 3077.317 | 3069.335 | 3232.059 |
| Personal Exemption ($b) | 375.177 | 383.210 | 404.808 |
| Taxable Income ($b) | 8344.174 | 9743.507 | 10194.449 |
| Regular Tax ($b) | 1494.026 | 1750.669 | 1855.496 |
| AMT Income ($b) | 10990.180 | 12468.655 | 13027.447 |
| AMT Liability ($b) | 0.583 | 1.967 | 1.452 |
| AMT Filers (#m) | 0.090 | 0.350 | 0.280 |
| Tax before Credits ($b) | 1494.609 | 1752.636 | 1856.948 |
| Refundable Credits ($b) | 657.905 | 827.233 | 101.663 |
| Nonrefundable Credits ($b) | 93.933 | 0.002 | 102.266 |
| Reform Surtaxes ($b) | 0.000 | 0.000 | 0.000 |
| Other Taxes ($b) | 12.290 | 13.496 | 14.083 |
| Ind Income Tax ($b) | 755.060 | 938.897 | 1667.103 |
| Payroll Taxes ($b) | 1217.293 | 1317.688 | 1420.460 |
| Combined Liability ($b) | 1972.353 | 2256.585 | 3087.563 |
| With Income Tax <= 0 (#m) | 137.310 | 129.930 | 98.420 |
| With Combined Tax <= 0 (#m) | 98.880 | 98.570 | 68.270 |
| 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 |