Using the earned income tax credit and child tax credit as examples, CBO describes how it supplements information from a sample of tax returns with data from the Current Population Survey when analyzing the effects of some tax policies.
For tax analysis, the Congressional Budget Office uses information from a sample of tax returns supplemented with survey data. Tax returns have detailed information about income from taxable sources but limited information on demographic characteristics. The Current Population Survey (CPS) has broad demographic information but limited information on income and expenditures. The two sources lead to different population, income, and tax liability estimates.
In this document, CBO uses the earned income tax credit (EITC) and the child tax credit (CTC) to illustrate the types of policies for which CPS-based estimates may be used to approximate those from tax returns. Simulated EITC benefits based on the CPS are substantially lower than totals from the tax data, but CPS-based estimates of the CTC are much closer to totals from the tax data.
Estimates using merged data from the two sources are more similar to results using only the tax data than results from using the CPS alone. However, the merged data overstate the share of benefits to unmarried male taxpayers relative to what either underlying data set shows.
