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PSLmodels / Business-Taxation

USA Corporate and Pass-Through Business Tax Model
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Reorganizing BRC and order of calculation #37

Closed codykallen closed 6 years ago

codykallen commented 6 years ago

At our previous meeting, I (hopefully) explained the order of building the baseline for BRC. The current version starts with the corporate tax revenue forecast from CBO, subtracts off the AMT (forecast with the PYMTC), adds back the PYMTC and the FTC (forecast individually, but soon to be done through the international tax model), divides by the statutory rate less the GBC "adjustment rate" (estimated based on historical data) to get taxable income, adds back the domestic production deduction (forecast individually), and adds back depreciation (forecast individually) and net interest (forecast based on historical data and the forecast of the capital stock) to get earnings.

As an alternative, we could just do this backing out prior to 2014 (start year of BRC), and then advance each component individually. The growth factor for corporate earnings would come from CBO's forecast for corporate profits, the growth factor for noncorporate earnings would come from CBO's forecast of proprietors' nonfarm income, the growth factor for business investment would come from CBO's forecast of nonresidential fixed investment, and the net interest deduction, AMT/PYMTC and other minor components could be forecast based on these main factors.

This alternative approach seems very doable, and it would be consistent with the approach currently used in Tax-Calculator. If implemented, it would also be easier to separate the BRC calculations from the construction of the data, which would be sent over to taxdata.

@martinholmer @andersonfrailey @hdoupe @abraham-leventhal @lucassz, what do you think of this approach?

codykallen commented 6 years ago

This issue was resolved by #40.