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Estimated age profiles of the annual net fiscal impact of an individual by immigrant generation. Note: Data are from the March Current Population Survey, 1994 and 1995. Data have been smoothed on a moving window of 1,000 observations using a local regression smoother.
These age profiles for taxes are based largely on the CPS, as were those for benefits, and, like the benefit-age profiles, they have been adjusted to match totals given in the National Income and Product Accounts. The CPS imputes tax payments for individuals for federal income tax, FICA, state income taxes, and property taxes. We allocate 70 percent of property tax to renters and 30 percent to the owners of rental properties (for a discussion of the incidence of various kinds of taxes, see Chapter 6). The CPS does not impute state sales taxes. We assume that immigrant households remit $1,250 abroad that is not subject to sales tax (see literature reviewed in the California case study).14
In looking at the sum of the benefit profiles just discussed with the costs of government-provided private or congestible goods, a striking pattern emerges: net receipt of benefits in childhood and old age, with a period of net payment of taxes during the working years (see Figure 7.9). Because the variation across age
A regression estimated for California (reported in Sheffrin and Dresch, 1995) is used to estimate taxable household expenditures based on adjusted household income, after subtracting the assumed remittance abroad. We then calculate the average sales tax rate that would be needed to generate the NIPA total sales tax revenues for all states combined, and allocate the resulting imputed sales tax payment to the household head.