Forecasting Taxable Income for the Individual Income Tax Micro Model, January 2007

(2007) Forecasting Taxable Income for the Individual Income Tax Micro Model, January 2007. Revenue, Department of

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Abstract

The Iowa Department of Revenue individual income tax micro model uses the most recent tax filing data for taxpayers in the state and proposed or estimated tax parameters to project individual and aggregate tax liability for a future tax year. Because taxpayer data only become available a year or two after taxes are due and because income grows over time, it is necessary to project growth in the reported income of taxpayers to accurately project future tax bills. In addition, the aging of the baby boom generation over the next 25 years will lead to a shift in the age distribution of Iowa taxpayers. It is important to incorporate these expected changes in the age distribution of future taxpayers because the Iowa tax code includes several preferential provisions for the elderly