Tuesday, February 24, 2009

TaxSim: a free and very powerful tool

The National Bureau of Economic Research provides an excellent free tax simulation tool which can give you a very nice "quick and dirty" but roughly accurate way to estimate the effect of many important provisions of federal and state income tax law, including current, past, and projected future tax laws.

It is available here:


You can fill in a few key parameters of a prototypical taxpayer, specify the year and the state, and see the taxpayer's federal income tax, federal payroll tax, and state income tax, as well as the taxpayer's marginal tax bracket.

You can also upload a whole spreadsheet full of parameters to compare how those variable would change over time, across states, across income levels, or across any number of different variables that interest you.

Researchers, such as Professors Poterba and Sinai, whose work on home mortgage tax breaks I mentioned in the previous post, use TaxSim to explore many of the convoluted features of our tax code.

I encourage you to take a look at this very powerful simulator--TaxWise has shown you the "trees," but TaxSim shows you the overall patterns of the "forest."

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