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clear all
set more off
set maxvar 10000
*Set path
***
*cd ---- specify path to \data_replication\psid\
local procdata "./proc_data"
*Define the CPI annual average for each relevant year.
*These are defined for the relevant year of the survey (e.g cpi1999 is for 1998)
local cpi1999 = 163.01
local cpi2001 = 172.19
local cpi2003 = 179.87
local cpi2005 = 188.91
local cpi2007 = 201.56
local cpi2009 = 215.25
local cpi2011 = 218.09
*Run TAXSIM and compute disposable income
forval x=1999(2)2011{
di "YEAR `x'"
cd raw_data
*Recode the PSID data
do FAM`x'ER.do
*Construct the variables of interest (income components)
do save_data_`x'.do
********************
*Proceed to TAXSIM
********************
*Generate tax year (previous year from the survey year)
g year = year_survey - 1
*Convert PSID state codes to TAXSIM state format
g state = 0
replace state = 1 if state_residence == 01 /* Alabama */
replace state = 2 if state_residence == 50 /* Alaska */
replace state = 3 if state_residence == 02 /* Arizona */
replace state = 4 if state_residence == 03 /* Arkansas */
replace state = 5 if state_residence == 04 /* California */
replace state = 6 if state_residence == 05 /* Colorado */
replace state = 7 if state_residence == 06 /* Connecticut */
replace state = 8 if state_residence == 07 /* Delaware */
replace state = 9 if state_residence == 08 /* DC */
replace state = 10 if state_residence == 09 /* Florida */
replace state = 11 if state_residence == 10 /* Georgia */
replace state = 12 if state_residence == 51 /* Hawaii */
replace state = 13 if state_residence == 11 /* Idaho */
replace state = 14 if state_residence == 12 /* Illinois */
replace state = 15 if state_residence == 13 /* Indiana */
replace state = 16 if state_residence == 14 /* Iowa */
replace state = 17 if state_residence == 15 /* Kansas */
replace state = 18 if state_residence == 16 /* Kentucky */
replace state = 19 if state_residence == 17 /* Louisiana */
replace state = 20 if state_residence == 18 /* Maine */
replace state = 21 if state_residence == 19 /* Maryland */
replace state = 22 if state_residence == 20 /* Massachusetts */
replace state = 23 if state_residence == 21 /* Michigan */
replace state = 24 if state_residence == 22 /* Minnesota */
replace state = 25 if state_residence == 23 /* Missippi */
replace state = 26 if state_residence == 24 /* Missouri */
replace state = 27 if state_residence == 25 /* Montana */
replace state = 28 if state_residence == 26 /* Nebraska */
replace state = 29 if state_residence == 27 /* Nevada */
replace state = 30 if state_residence == 28 /* NewHampshire */
replace state = 31 if state_residence == 29 /* NewJersey */
replace state = 32 if state_residence == 30 /* NewMexico */
replace state = 33 if state_residence == 31 /* NewYork */
replace state = 34 if state_residence == 32 /* NorthCarolina */
replace state = 35 if state_residence == 33 /* NorthDakota */
replace state = 36 if state_residence == 34 /* Ohio */
replace state = 37 if state_residence == 35 /* Oklahoma */
replace state = 38 if state_residence == 36 /* Oregon */
replace state = 39 if state_residence == 37 /* Pennsylvania */
replace state = 40 if state_residence == 38 /* RhodeIsland */
replace state = 41 if state_residence == 39 /* SouthCarolina */
replace state = 42 if state_residence == 40 /* SouthDakota */
replace state = 43 if state_residence == 41 /* Tennessee */
replace state = 44 if state_residence == 42 /* Texas */
replace state = 45 if state_residence == 43 /* Utah */
replace state = 46 if state_residence == 44 /* Vermont */
replace state = 47 if state_residence == 45 /* Virginia */
replace state = 48 if state_residence == 46 /* Washington */
replace state = 49 if state_residence == 47 /* WestVirginia */
replace state = 50 if state_residence == 48 /* Wisconsin */
replace state = 51 if state_residence == 49 /* Wyoming */
*Marital status: 1 for single, 2 for joint, 3 for head of household.
* Making single if never married, widowed, divorced, separated, or other.
g mstat = cond(marital_status_head != 1, 1, 2)
* Making head of household if unmarried with children.
replace mstat = 3 if mstat == 1 & children > 0
*Number of dependents (kids) per tax form.
g depx = children
*Labor income of primary and secondary taxpayers
*Includes:
*wages and salaries
*+any separate reports of bonuses
*+overtime
*+tips
*+commissions
*+professional practice or trade
*+market gardening
*+additional job income
*+and miscellaneous labor income
g pwages = labor_inc_head + business_labor_income_head
g swages = (labor_inc_wife+business_labor_income_wife)*(mstat==2)
*g swages = labor_inc_wife*(mstat==2) // only matters if married
*Gross social security benefits
*Taxsim will calculate the portion includable in adjusted gross income (AGI)
g gssi = socsec_income_hh //together wife and head
*Other non-taxable transfer Income such as welfare, workers comp,
*veterans benefits and child support that would affect eligibility for state
*property tax rebates but would not be taxable at the federal level
g transfers = vapension_inc_head + workerscomp_inc_head + tanf_inc_head + ///
otherwelfare_inc_head + childsupport_inc_head + transf_rel_head + ///
ssi_head+ ///
(mstat==2)*(workerscomp_inc_wife + tanf_inc_wife + otherwelfare_inc_wife + ///
childsupport_inc_wife + transf_rel_wife + ssi_wife)
*(mstat==2)*(workerscomp_inc_wife + tanf_inc_wife + otherwelfare_inc_wife + ///
*childsupport_inc_wife + transf_rel_wife + ssi_wife)
*Unemployment compensation benefits
*Taxsim will calculate the portion included in AGI
g ui = unemployment_inc_head + unemployment_inc_wife
*g ui = unemployment_inc_head + (mstat==2)*unemployment_inc_wife
*Number of dependents under age 17
*Cannot distinguish between children in PSID (asign all children who live in
*Family Unit as dependent)
g depchild = children
*IRA and annuities (benefits and contributions)
*g otherprop=pension_ben-pension_contrib
*Annuities/IRAs head and wife (benefits)
g otherprop=annira_head+pension_wife+business_asset_income_head+business_asset_income_wife
*Taxable retirement income
g pensions = nonva_retir_head+other_pen_head
*Labor income less pension contributions
replace pwages = pwages - stat_pen_contrib_head
replace swages = swages - stat_pen_contrib_wife
*Run taxsim
taxsim9, full replace
di "TAXSIM FOR YEAR `x' OVER"
*Compute total income before tax
gen pretax_income = pwages + swages + transfers + gssi + ui + otherprop + pensions
*Compute disposable income
*Deflate by the CPI (base year 1998)
rename fiitax federalTax
rename siitax stateTax
gen aftertax_income_defl = (pretax_income - federalTax - stateTax)*(`cpi1999' / `cpi`x'')
*Drop HH with negative income (stemming from pension contributions that are too high relative to income or from business losses)
drop if aftertax_income_defl<0
*Adjust using equivalence scales (OECD)
gen nr_adult = size_fam-depchild
gen equiv = 1.0 + 0.7*(nr_adult-1) + 0.5*depchild
gen aftertax_income_defl_equiv= aftertax_income_defl/equiv
*Drop all unnecessary variables
keep aftertax_income_defl_equiv age_head year_survey ed_head marital_status_head fam_ID_1968 fam_ID_year size_fam equiv state_residence
cd ..
save "`procdata'/temp`x'.dta",replace
}
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