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The Complete Custom Income Tax Simulator

  • Powerful tax-calculating engine customized with each state tax code
  • Taxpayer database for each state with tax, income, expenditure, and wealth variables
  • Five-year forecasts for “what-if” scenarios of adjusted tax laws
  • Tools for designing a tax code to achieve desired impact on local and regional constituents
  • Detailed tax burden measures

SimTax, American Economics Group, Inc.'s (AEG's) powerful income tax simulation tool, helps state and municipal governments deal with the ever-changing economic and political realities that affect personal income taxes. There is nothing on the market like it—SimTax is both a powerful tax-calculating engine and a comprehensive database.

Compute the Effect of Changes in Federal Taxes and the Economy
Since most states reference federal tax law, any change in national tax policy could automatically change your state's taxes, often requiring legislation to keep your tax policy on track. If federal taxes decline, for example, states need to decide quickly and clearly how to adjust their own tax codes to meet revenue targets or other policy goals.

SimTax enables AEG's clients to determine precisely how changes in the federal tax code will affect income tax collections. Customized for each state, SimTax comes pre-loaded with the formulas in your tax code and a database weighted for all taxpayers. It allows you to change your state's tax code in virtually any way and immediately see how those changes affect collections, the distribution of taxpayer burdens, and incentives, credits, and other tax devices.

In addition, your tax policy could be affected by changes in the economy such as jobs, income, inflation, shifting political attitudes toward housing policy, capital gains, and maximum tax rates and brackets. How has your state's personal income tax changed over time? What is its burden on households of different income levels? Does your tax code advance your state's policies on home ownership, economic development, and low-income safety nets? SimTax can help you investigate these and many other issues.

By tying SimTax to our forecasting model, AEG enables you to examine the effects of changes in tax policy on a wide range of industry groups and regional stakeholders—such as a state's largest employers, exporters, or employment-rich industries—all in sync with the latest economic forecast.

Obtain Detailed Taxpayer and Household Information
SimTax contains a comprehensive database of taxpayers that goes way beyond data you may now collect from tax returns. Each household record in the database contains a long list of variables encompassing household composition, income, expenditure, asset, debt, and tax items.

  • Household composition variables: earners, dependents, ages, medical status, filing status, school status.

  • Income variables: wages, interest, dividends, rent, royalties, gains, pensions, transfers, and business income.

  • Expenditure variables: categories and subcategories of food, shelter, clothing, health, and transportation.

  • Asset variables: categories of stocks, bonds, mutual funds, mortgages, cash, and other instruments.

  • Debt variables: mortgages and various categories of other loans.

  • Tax variables: complete tax form details for filings under current law and items that can be changed during a simulation.

Calculate Full Tax Returns
Another unique feature of SimTax is its use of household variables to calculate full tax returns, even when taxpayers file a short form return. By using pre-loaded formulas and decision modeling, SimTax proceeds through the database, automatically constructing custom variable data. During this process, the software steps through each household, applying tax formulas to the data elements in each record, including both original and custom data. For each household, the calculator completes a virtual tax return, making choices appropriate to the household's situation and applying probabilities consistent with the patterns of actual taxpayers. At the end of a full run, it adds complete tax return items (and other requested information) to each household record.

After a run you can use these full records to produce tables, graphs, cross-tabulations, and analysis. You can also compare the returns with previous runs to identify the winners and losers after a tax change. Each household record has a weight variable that tells how many households in the state it represents. When producing reports, SimTax takes the weight into account to adjust the numbers to cover all taxpayers in the state. So each report's data represent the entire state and non-resident filers, not just the households in the database.

Help Negotiate Tax Proposals
SimTax can also re-weight taxpayer data to match other estimates from, for example, the governor's office, a legislative body, or a political party, which can help you in tax negotiations. When someone proposes a tax change and produces estimates of that change, you can automatically re-weight the database to target the results to hit their estimates under current law. You can then test the validity of the proposed changes in law against the benchmark of that estimate. This gives you a common basis for negotiating changes in the proposal or suggesting a counter-proposal.

Project Income Taxes Five Years Ahead
AEG's detailed regional and state economic forecasts can automatically drive SimTax. By linking them, you can project tax results for five future years, using our assumptions or inputting your own. Taxpayer income, deductions, and other tax items adjust over time consistently with the AEG economic forecast for your state. The result is a solid five-year forecast of income taxes under current or proposed law.

SimTax is a trademark of American Economics Group, Inc.


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