Differences in Wage and Salary Income Included in Various Tax Bases Background paper

摘要

To generate projections of revenues from those taxes, Congressional Budget Office (CBO) models each tax separately. But the underlying projection of the growth of wages used in those models derives from a single macroeconomic forecast. To convert that single projection of wages into separate wage bases for the different taxes, it is necessary to identify the sources of differences in the bases and their magnitudes. This paper describes the effect of those differences on CBO's forecast of payroll tax revenues. The first section of the paper briefly describes the taxes and how their coverage differs. The second section explains the data available to examine the differences. The third quantifies the magnitudes involved. Next, the paper shows how that information is used in CBO's tax projection models. Finally, the paper demonstrates how much difference that approach makes compared with a method in which the sources of differences in the bases are not identified and wage income subject to the income tax is used as the base for the payroll tax.