tax liability, the model would use individual records on families from the input database and apply the detailed federal tax rules to each family in the database. In effect, the program fills out the tax forms for each family. TRIM3 counts dependents, adds up income, subtracts adjustments to income, subtracts the larger of itemized or standard deductions, subtracts personal exemptions, computes taxes on available income, and computes and subtracts tax credits to arrive at the final tax liability for each family. To obtain aggregate tax liability, each family’s tax liability is multiplied by its weight and then added to obtain the total.

In some cases, the primary input database for a microsimulation model may not exactly match the data needed to simulate the policy. For estimating eligibility and participation in transfer programs, monthly income is typically needed to simulate the income eligibility provisions of the programs. However, the March CPS data provide only annual income data. The TRIM3 model includes a procedure to estimate monthly income from annual income reports. Further, since people tend to underreport their participation in transfer programs in surveys like the CPS, the TRIM3 model makes adjustments to account for this underreporting using control totals from administrative records from transfer programs.

This appendix briefly presents the history and current capabilities of TRIM3. The remaining sections cover the two aspects of TRIM3 used most directly in the analyses in this report: (1) the allocation of reported annual income amounts across the months of the year and (2) the simulation of transfer program eligibility and receipt.

HISTORY AND CAPABILITIES OF TRIM3

TRIM3 has been developed at the Urban Institute with funding from the U.S. Department of Health and Human Services (DHHS) and other government and private funders. TRIM3 is a descendant of the first microsimulation model ever developed—the Reforms in Income Maintenance (RIM) model first developed in 1969 by members of the President’s Commission on Income Maintenance Programs. RIM was followed by the first TRIM model, which was operational in 1973, and by TRIM2, which was operational in 1980. The goals of TRIM and TRIM2 were to make the system increasingly comprehensive, flexible, self-documenting, and useful for quick-turnaround policy simulations of tax and transfer policies.

In 1995, the assistant secretary for planning and evaluation (ASPE) of DHHS began funding the development of TRIM3. This latest version of



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