Incorporating State Analysis into the Tax Policy Center's Microsimulation Model: Documentation and Methodology

The Urban-Brookings Tax Policy Center’s (TPC) microsimulation model produces revenue and distributional estimates of the US federal tax system. This paper describes a reweighting procedure that allows the model to be used for analyzing taxes at the state level. We construct state weights such that distributions of key tax variables in our database match state distributions published by the Internal Revenue Service's Statistics of Income Division. The model can now examine federal taxes at the state level, state income taxes, and often overlooked interactions between federal and state tax policies. We analyze three federal policy proposals by state and two state policy proposals to demonstrate the new capabilities.