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Introduction and Overview Guide

1. SPSD M Introduction and Overview Guide This guide is designed to give an overview and introduction to the SPSD M It describes the construction of an SPSM simulation run and contains several examples of model use It should be read completely by anyone who will be using the SPSD M for research purposes Statistics Statistique E ivi Canada Canada Canada Table of Contents is O 1 What You Should Already KNOW di noes 1 Using This Guide riot da diia 1 Overview OF he S PSI Mi tii sucaaen a tug ayanesene shane sens AEE ARIAS 2 Capabtlities and Features ssrciiiis eise E RA E EaR SNE atai 3 Soare and PCS ds din cn E iea 4 Quick Stata ade if 5 SPSM Stud ia iii cada 6 Rumi the SITO ass 8 Examine the log WindOW a aside decisions uta aine 10 Examining QUPUt fase sie ayisaiedaseecaiss aea eaea anaE E Ea EE eS E ASEET Erain 12 Understanding Basic COMpoOnments ss ciscis cisvesssccsesectevasdqonsvevadsnaheacdssuasdevsqnavsnashoensdeesbecdabaseete 14 A ER 15 Level Analysis ct nta 17 Variable PES iS E E a ei 17 Ss ooren aoee e eaaa a R A R E E LESIE ETa 18 Database AUS a a e eo ias 19 Calculate Base Results and Variant Results ooooonnnncccnnoncccnoccnononcconanacinnnnss 19 User Variables cir dis tin ts drena 21 Screening Cases and Output Phase oooonocccnnocccnoncccnoncccnoncnonnnanonnnnncnnnnncnnnncann 21 A O E NO 22 Control Par paetacty be oa acaec Vacs ucedee cae og a eames aio ia 25 Database Adjustment Parameter
2. ccccsscccssececssececssscceesscceesecessscesenaees 23 Tax Transter Parameters veintidos nclrienis cata eisi 26 Dpto dobra ando 26 Disposable and Consumable Income oooococnnococonnccconnnnnnnnnnononanonnncnonononononcnononnccnnnnnss 27 SPSM Files de ene E a TEk 27 SPSM User Facilite g id geait eerte e iep inr a 29 User defined Yara e a a a eR a e 29 Parametros 30 Screenin eo de ap a 31 User Defined Variable Facility viii airis obediente 32 A AA 32 Distributional Analysis Pai iS 33 Marginal Tax Rate Facility cessie ii e A i ias 35 Cas Outpt Eiles cs Te e o o E O 36 Turis Point Pac oa E ertetasd a wosnereease eee 37 Ex king Facility cae k eis ue Ce A RE E oa 37 Reference V anable Facility a a 37 Example Simulations sccisecsccaisceavastves jocevi todas Er unatna dosdgacasBataesuundseees seasaatelavecevantaens 38 Session 1 Change Tax Transfer Parameters siii ra 38 Session 2 Base Scenario Custom Tables User Analysis Variables 43 Table 1 Totals changes and averageS oooococconcccnoncnononcnononccnnonaconanccnnnnccnnnnnos 46 Table 2 Classification variables and distributionsS oooncncccnononininocicncnconons 46 Table 3 Family tables and records wi sssccsclsccessscccsaasevsacty astsetesssecdesanedcatacesees 47 Session 3 New Earned Income Tax Credit SimulatiON ooooooooonnnccnnnnnnonnonnnonononnonanos 48 Guide to SPSD M DocumentatiO oooooooonnnnccnononnonononononnnnnnnonnnnononononnononnnnn
3. fi711 00 E 2 3 Government Transfers and Personal Income Taxes 2 3 0 Parameter File Description 2 3 1 Database variable activation E 2 3 2 Government Transfers 2 3 2 1 Unemployment Insurance 2 3 2 2 Family Allowance 2 3 2 3 Did Age Security DAS Source Increased by 200 2 3 2 4 Guaranteed Income Supplement E Zoo 2 3 2 5 Provincial Elderly Programs ese ad 2 3 2 6 Federal Sales Tax Credit 2 3 2 7 Federal Refundable Child Tax Credit 2 3 2 8 Federal Child Tax Benefit FCBBAS FCBYNG FCBYNGR FCBUCCB FCBLRG FCBTD FCBRR FCBRRS FCBESR FCBERR FCBERR1 FCBERR2 A FCBERR3 FCBEIS FCBECI FCBEMX FCBETD FCBEIE FCBEIS1 FCBEIS2 FCBEIS3 FCBPI 2 3 2 8 1 Federal Child Tax Benefit for the calendar y E 2 3 2 9 Universal Child Care Benefit a ala J S Control Adjustment Variant Tax Transter Ready STC Source File 5PSD ba04 cpr Simulation Directory H Intro SPSM runs it ii Executable SPSM EXE Version 16 0 ae CO e de ld Increase FCBEIS2 and FCBEIS3 in the same manner The only other thing that we will change is the description of this scenario Scroll to the top of the tree and open the Parameter File Description tab Then click on MPRDESCE This parameter allows you to label this variant scenario Change the text to read Increase NCBS by 200 per child Introduction and Overview Guide Page 42 SPSD M Version 16 1 2 Visual SPSM Ex1 Tax transfer 2004 Population 2004 Incomes 2004 2004 F
4. 3 The data retrieval and reporting software are configured as facilities accessed through the model They allow the user to produce formatted output and to perform specific kinds of analysis 4 The user documentation is extensive and comprehensive It is divided into three manuals with a number of guides in each There are also two ways of running the SPSM using the Visual SPSM interface and using the Classic SPSM mode 1 Visual SPSM The Visual SPSM interface allows users to modify model parameters directly run simulations using SPSM and examine outputs 2 Classic SPSM The SPSM can also be run from the command interpreter cmd CAPABILITIES AND FEATURES The SPSD M algorithms operate on a database created using survey and administrative data from 2004 The SPSD M comes with the necessary algorithms and parameters to simulate the tax transfer systems in that year The SPSD M also performs projections to all other years from 1991 through 2012 The following is a list of the major programs which can be simulated with the SPSM Users can add their own algorithms to this set Personal Income Taxes 1991 to 2012 taxation year algorithms Major deductions and tax credits Payroll taxes CPP QPP UT ED Both Federal and Provincial tax algorithms Cash Transfers Unemployment Insurance Employment Insurance benefits Old Age Security benefits including partial benefits Guaranteed income supplement benefits including partial benefits Pr
5. Growth Factor Self employment income 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 GF IEMP 10 Growth Factor Employment income 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 00000 00000 5 Do you wish to modify any database adjustment parameters gt n The next step is editing the variant tax and transfer parameters Once again a few key parameters are shown If we had made changes to any control parameter files these would be read in 6 Tax Transfer Parameters Loading variant tax transfer parameters from Quick_V mpr Current values of selected variant tax transfer parameters MPRDESCE Current values for 2004 CTFLAG 1 Commodity tax activation flag CTOPT 2 Commodity tax calculation method 6 TARGETYEAR 2004 Year of analysis Do you wish to modify any variant tax transfer parameters gt n Execution SPSM started on Fri Aug 15 11 27 56 2008 71 SPSM completed on Fri Aug 15 11 27 57 2008 Elapsed time 00 00 01 Number of households processed 82754 Number of persons selected 232467 Variant consumable income 000 000 598271 4 Control parameter file Quick cpr Table output file a eo Quick tbl Database adjustment parameter file Quick apr Variant tax transfer par
6. No base results Variant Description Current values for 1992 Driver Version 10 0 88 09 File SPSD ba92 mpr Sample 1 0000 AGENAME Standard Distribution report Child care expenses allowed for Individuals Total observations 234659 Zero observations 225632 The following statistics are based on 9027 non zero observations Descriptive Statistics Sum of weights 872953 Weighted Sum 1908380904 Weighted Sum of Squares 7555806526246 Weighted Mean 2186 Extreme Values with associated household numbers Minima hdseghh Maxima hdseghh i 81136 12000 484 2 41280 12000 485 6 30241 12000 488 6 30242 12000 28664 7 40293 12000 71555 The following statistics are based on a sample of 3000 Selected Quantiles Ql 569 Pl 78 P90 5038 P20 444 P60 2032 Med 1678 P2 88 P95 6308 P30 701 P70 2786 Q3 3181 P5 147 P98 8000 P40 1062 P80 3729 P10 221 P99 8000 Note that the maximum value on the database is equal to a full deduction for three children Introduction and Overview Guide Page 34 SPSD M Version 16 1 If extreme values are not as anticipated the user can then produce a detailed report on the relevant households by using the selection facility and the print file output facility Histogram Plot a 4 qa Pl P20 P40 P50 P70 P99 78 444 1062 1678 2786 8000 The distribution rep
7. The use of directory structures and strict naming conventions have been used in order to avoid confusion The following table gives the file extension naming conventions used for SPSM input and output files Users of Visual SPSM may never see most of these files Introduction and Overview Guide Page 27 SPSD M Version 16 1 Database Inputs iia SPSD binary database file PEAY SHS household level expenditure data NGT SPSD file containing survey weights Parameter Inputs Complete and mandatory CER Control parameter file BER Database adjustment parameter File MPR Tax transfer parameter file Partial and optional created by user SES Control parameter include file En Database adjustment parameter include file ames Tax transfer parameter include file Partial created by Visual SPSM CPP Control parameter difference file SAPD Database adjustment parameter difference file MER Tax transfer parameter difference file SPSM Outputs Printable TBL Output tables result file PR Case output facility text results file Input to further analysis ee Binary SPSM results file Program Run Control SBAI SPSM Dialogue commands CMD SPSM Dialogue commands SOIG SPSM Dialogue commands Visual SPSM state KSLA Visual SPSM state SPSD M File Naming Conventions The database files are all named by Statistics Canada and should not be changed There are many types of input files The parameter files with CPR APR and MPR must be complete and valid SPSM
8. so subsampling is not usually necessary However it is still possible to run the SPSM with a partial sample In Visual SPSM sub sampling is controlled by setting a control parameter to the sub sample desired SPSM will then read and process the SPSD until the desired sub sample has been attained In Classic SPSM users also have the option to press the CTRL BRK key combination to interrupt the run after some fraction of SPSD has been processed In either case the sub sample actually obtained is recorded in the control parameter file and output tables are scaled by the reciprocal of this value Reading of the SPSD always proceeds sequentially but a relatively unbiased sub sample is nevertheless obtained because households in SPSD are by and large randomly ordered The ordering is not completely random however In order to improve the accuracy of results obtained when using sub sampling SPSD has been arranged as a running stratified sample Samples of set sizes the first 5 25 and 50 of the file have been arranged to have representative provincial and household income distributions Selection Facility The SPSM selection facility provides a means to restrict the set of individuals and families which are processed by the SPSM output and reporting facilities Selection satisfies two distinct needs Firstly it allows the analyst to focus attention on a particular sub group of interest Secondly it can allow SPSM to execute faster by restri
9. 9 391 4 12001 24000 278 7 624 4253 446 4 777 8 24001 Max 0 0 0 0000 0 0 4060 6 All 1010 8 681 5119 1483 1 14525 5 Table 2U shows the same results as Table 1U except they are now broken out by individual employment earnings level As we would expect no benefits are paid to individuals with over 24 000 of earned income The 196 5 million in EITC benefits paid to individuals having no employment income appears to be an error Recall however that the program as specified is based on family employment income This means that if an employed person earning between 1 and 24 000 had a spouse with zero earnings that spouse would be eligible for the benefit as eligibility is based on family income but the benefit is assigned to Introduction and Overview Guide Page 53 SPSD M Version 16 1 each individual Notice that the average benefits for the 8001 12000 employment income group is 1 081 Some readers may have expected the number to be 1 200 or maximum benefits This would be the case if the table were restricted to unattached individuals Again this is not the case as the table is based on the income of individuals but the benefits are based on family employment income The 1 081 is short of the maximum due to married couples who have more than one earner and whose combined income is less than 24 000 In these cases the income of the second earner moves the family employment income into the range where benefits are reduced I
10. M may be projected to represent a variety of different years using a method of static aging A set of database adjustment algorithms and alternate weight files are included with the model to this end The algorithms allow the user to grow or project the value of the money items on the base year database to some future year The user can specify a series of growth rates which are then applied by the model In most cases a single scaling factor is applied However for certain important or complex variables more complicated rates are applied For example employment earnings are grown by rates specific to province and sex of the individual These algorithms are used in conjunction with annual demographic weight files included as part of the database Users may add their own adjustment routines to augment or even replace the supplied adjustment algorithms For example if users wish to grow employment income at rates differing by age and sex they could set the existing employment income scaling parameters to one and create a new income scaling algorithm SOFTWARE AND FACILITIES The SPSD M comes with a powerful software support environment designed to enhance the range speed and ease of policy analysis in both black box and glass box modes The comprehensive and flexible set of reporting options allow for detailed examination and verification of the database algorithms and results The software has been designed to work in an integrated fashion at
11. This is accomplished by establishing a conditional group of statements with in the braces See the User s Guide for more information on statements 6 The EITC benefit payable to eligible individuals having a combined head spouse employment income of less than 8 000 is then calculated as 15 of head plus spouse employment income This is the first slope of the function Note that zero employment income will result in zero benefits 7 The maximum EITC benefit of 1 200 is then payable to eligible individuals having a combined head spouse employment income of between 8 000 and 12 000 8 The EITC benefit payable to eligible individuals having a combined head spouse employment income of between 12 000 and 24 000 is then calculated as maximum benefits less 10 of employment income in excess of 12 000 This is the third and final slope of the function 9 The variable eitc is then labelled 10 dispinc immdispteitc label dispinc Disposable Income 11 gainer eitc gt 0 label gainer Received EITC Flag Gainer 12 nochange eitc 0 label nochange Unaffected by EITC Flag 13 agegrp split idage 20 64 label agegrp Age 14 empigrp split idiemp 0 8000 12000 24000 15 dispgrp split immdisp 5000 10000 15000 20000 25000 30000 35000 40000 45000 label dispgrp Base disposable income group 10 Because the definition of immdisp disposable income is not modifiable in black box mo
12. and a link to the licence agreement Click on Close to get the following screen Visual SPSM alla File Edit View Tools Window Help Dae ne HZ Ready STC Source File __ Simulation Directory C Documents and Settings joneien My Document Simulation Executable SPSM EXE Version 16 0 Open a new simulation by clicking File and then click New Simulation A box will show up which gives the possible starting points Choose the base year 2004 and the click OK Introduction and Overview Guide Page 8 SPSD M Version 16 1 w New Simulation Start From I Run Base Y Run Variant Standard y Glass Box Browse MRS File Browse OK Cancel You now get the following interface which allows you edit parameters if wanted 2 Visual SPSM Untitled Tax transfer 2004 Population 2004 Incomes 2004 20045 Elle Edit View Tools Window Help DRESDEN g par E 2 1 Model Control Parameters 2 1 1 General information 2 1 2 SPSD input files 2 1 3 Database adjustment 2 1 4 Variant Information 2 1 5 Base Information 2 1 6 Subsampling random number seed 2 1 7 Record selection facility 2 1 8 Marginal Tax rate facility 2 1 9 Turning Paint facility 2 1 10 User defined Variables 2 1 11 Text output facility 2 1 12 Reports 2 1 13 Parameter reporting 2 1 14 Tabular reporting 2 1 15 User defined control parameters if any 2 2 cas al Variant Tax Transfer Tables
13. apr Name of database adjustment parameter file Scenario Control lt no base variant computed using parms gt BASMETH 0 Method of creating base variables VARMETH 2 Method of creating variant variables INPVARMPR Quick_V mpr Output Files OUTMRSF LAG OUTCPR Quick 0 Cpr Variant Name of control parameter file Name of variant tax transfer parameter file results file creation flag out Next if we had made changes to any control parameter files these would be read in 3 Since we made no such changes the defaults are kept The step 4 is never used when running the model using Visual SPSM it is there for people who use the model using Classic SPSM 3 Do you wish to modify any control parameters gt n No files will be overwritten with these control parameters 4 Any further control parameter changes gt n Writing out control parameters to Quick cpr The next step is editing database adjustment parameters A few of the key parameters are displayed In our example all growth factors have been set to 1 since this is the base year so effectively the database is not altered If we had made changes to any control parameter files these would be read in 5 Introduction and Overview Guide SPSD M Version 16 1 Page 11 Database Adjustment Parameters Loading database adjustment parameters from Quick apr Current values of selected database adjustment parameters GFISE 10
14. call Statistics Canada at 613 951 3774 should you have any questions SESSION 1 CHANGE TAX TRANSFER PARAMETERS This example creates a simple simulation which changes the values for the National Child Benefit Supplement in 2004 The maximum supplement will be increased by 200 per child First open Visual SPSM Create a new simulation by clicking on File New The following box appears scroll down and pick 2004 to create a simulation in 2004 with the 2004 tax and transfer system ra w New Simulation Start From 2004 v M Show Deflated Run Base Y Run Variant Standard y l Glass Box D MAS File MAA Browse OK Cancel The goal of this simulation is to increase the Child Benefit Supplement The first step is to find the parameters which need to be edited One way of doing this is to use the SPSD M help file Click on Help Contents to open the Help file You can either search the help file Introduction and Overview Guide Page 38 SPSD M Version 16 1 or you could navigate the tree Let s start by navigating the tree Open the parameter guide You want to find the parameters for the supplement so you click on Government Transfers and Personal Income Taxes Then click on Government Transfers then finally on the Federal Child Tax Benefit You can read about what the various parameters do but you will find that the three parameters that you need to change are FCBEIS1 FCBEIS2 and FCBEIS3 which represent the value
15. changes the unit of tabulation Instead of tabulating individuals it tabulates census families Only one member of a census family can receive the NCBS so the same variables as for the individual tables can be used safely It gives the total and average change of NCBS You can see that the average change in all groups but families with six children is less than the maximum This is because the benefit is clawed back by income This table also shows the number of SPSD records used to create the table It indicates that great caution ought to be used for families with 6 children as there were only 3 records used and the statistical variability will be large and the results will not be reliable Introduction and Overview Guide Page 47 SPSD M Version 16 1 Table 3U DER SPSD M Database 16 00 Fri Aug 15 13 53 36 2008 Base Description Current values for 2004 Driver Version 16 0 91 12 File Ex1_B mpr Variant Description Increase of the NCBS by 200 per child Driver Version 16 0 91 12 File Ex1_W mpr Sample 1 0000 AGENAME Standard Selected Quantities for Census Families by Number of children in census family Copy Table Number of children in census family Change in Total Federal Child Benefit Supplemen Average change SPSD Records gt 0 0 0 0 0000 65729 1 109 0 196 2630 12827 2 157 4 388 1477 13245 3 99 1 584 0154 4398 4 40 1 783 4347 963 5 18 9 975 9652 415 6 2 4 1200 0000 3 7 0 0 0 0000 0 8 0 0 0 0000 a 3 0 0 0 0000 0
16. four figures presented on the following pages contain the content Of eitc_EN cpi Numbered comments are used to explain the file s contents Introduction and Overview Guide Page 49 SPSD M Version 16 1 1 4 eitc cpi Include file for Tutorial Session 3 Id Purpose This file contains the necessary control parameters to simulate a new earned income tax credit The description of this new program and explanation of parameters is contained in the Introduction and Overview Guide under the heading of Tutorial Session 3 HARTA RARA HAHAHAHA OA AH HE EE HE 21 2 1 7 Record selection facility SELFLAG J Selection facility activation flag SELUNIT 2 Selection facility family level SELSPEC Selection specification idage lt 21 amp amp idcfrh 2 1 The comment block at the beginning of the file provides information on the purpose of the file contents as well as the name of the file These comment blocks are useful in parameter include files but should not be used in the parameter files themselves because the SPSM will strip these block comments lines starting with from the output parameter file 2 The selection facility will be used to perform a portion of the eligibility test The selection level of analysis is set to census families SELUNIT 2 The selection specification checks for individuals under the age of twenty one whose relationship to the head of the census family is that of
17. of the benefit for the first second and third child You then need to close the help file and go back to Visual SPSM We want to increase the value of these parameters by 200 Given the fact that you know the names of these parameters you could simply type them in the Edit box at the top left hand of the screen and then press Enter 2 Visual SPSM Untitled Tax transfer 2004 Population 2004 Incomes 2004 20045 Olea Eile Edit View Tools Window Help Close np rd UN MN E 2 1 Model Control Parameters 2 1 1 General information 2 1 2 SPSD input files 2 1 3 Database adjustment 2 1 4 Variant Information 2 1 5 Base Information 2 1 6 Subsampling random number seed 2 1 7 Record selection facility 2 1 8 Marginal Tax rate facility 2 1 9 Turning Paint facility 2 1 10 User defined Variables 2 1 11 Text output facility 2 1 12 Reports 2 1 13 Parameter reporting 2 1 14 Tabular reporting 2 1 15 User defined control parameters if any 40 0 0 0 0 0 0 0 0 0 0 H A Control Adjustment Variant Tax Transfer Tables Ready STC Source File SPSD ba04 cpr Simulation Directory H Intro SPSM runs Simulation Untitled Executable SPSM EXE Version 16 0 But instead let s navigate to the tree again We do not want to run a base scenario so click on the Variant Tax Transfer tab at the bottom of the screen Then open the tree until you find the Federal Child Tax Benefit parameters Introduction and Overv
18. parameter files and values for all three must be specified for any given program run The cp1 API and MPI files are created by the user with a text editor and contain subsets of the corresponding CPR APR and MPR files which may be read in during the user dialogue or by using Visual SPSM The CPD APD and MPD are similarly subsets of parameters but they are created automatically by Visual SPSM when parameters are changed A BAT or cmD file contains a sequence of responses to SPSM prompts corresponding to an actual user dialogue These files are mainly used with Classic SPSM The relationships of all these files to the structure of the SPSM are shown in the following diagram File types with their extension are shown in ellipses Introduction and Overview Guide Page 28 SPSD M Version 16 1 Inout r DIAL OGGIJE Parareters VIALOGUE ontrol Scenario Adjust CD Data ff J f f Jf RESULTS CA 0 KEA WO gt Adjust Database COMTAX GD Calculate Base Results Calculate Variant Results Record Selection User Variables Output Facility PARMS TABLES ASCII RESULTS Microdata Output SPSD M Files and Relationships This diagram can be used as a handy reference while becoming familiar with the files and naming conventions Note that two tax transfer parameter files are input for base and variant results calculations Also the SPSM results file can only be used to give base results and can on
19. to use With extensive use of default settings the flexibility is controlled by first time users However implicit in these settings are numerous assumptions which could potentially affect interpretation of the results Moreover the institutions and programs modeled by the SPSD M are themselves complex It is thus easy to make subtle mistakes which may result in significant estimation errors To make the best use of the SPSD M please read the available documentation Then if you have any problems or you are unsure of the simulation results please phone us at 613 951 3774 or email us at spsdm statcan ca WHAT YOU SHOULD ALREADY KNOW By now you should have the SPSD M installed on your computer If you do not please do so now The guide assumes that the user is already familiar with the use of Windows based applications In addition some knowledge of federal and provincial tax and government cash transfer programs as well as some familiarity with the data sources is essential The SPSD M is based on several disciplines including econometrics statistics computer science mathematics and microsimulation and training in any of these areas will be an asset While the SPSD M can be used for analysis on its own other software products can compliment and enhance analysis using the SPSD M Spreadsheets are good tools for manipulating output from SPSM standard and custom tables In addition statistical software packages such as PC SAS and SPSS are
20. 0 Distribution facility family level DISTVAR eitc Distribution facility variable DISTSAMP 200000 Distribution facility sample size DISTZERO 0 Distribution facility zero inclusion flag 16 The first built in table which is activated as a default is turned off here 17 The X tab facility is used to evaluate the impacts of the new program 18 The specification shown here produces three tables Note that the tables have been forced to be tabulated at the individual level of analysis IN In this type of application where benefits are being calculated on an individual basis the user may specify a table request at a higher family level and all analysis variables will be rolled up to that level However the classification variables must be calculated for the desired family level of table Thus for a NF table the user would group NF immdisp rather than immdisp Also the age would refer to the head of the nuclear family 19 The distributional analysis facility is used to explore the shape of the distribution of new EITC benefits The level of analysis is set to individual benefits DISTUNIT 0 Because DISTZERO is set to 0 individuals receiving no EITC benefits are excluded from the distributional report This file can be found in the SPSM EXAMPLE directory Create a new simulation for 2004 include this parameter file by going to File Read Parameter File in the Files of Type box Introduction and Overview Guide Page 5
21. 10 0 0 0 0000 0 1 0 0 0 0000 0 12 0 0 0 0000 0 13 0 0 0 0000 0 14 0 0 0 0000 0 15 0 0 0 0000 a 16 0 0 0 0000 0 17 0 0 0 0000 0 18 0 0 0 0000 a 19 0 0 0 0000 0 20 0 0 0 0000 a 21 0 0 0 0000 0 22 0 0 0 0000 a 23 0 0 0 0000 0 24 0 0 0 0000 Ol SESSION 3 NEW EARNED INCOME TAX CREDIT SIMULATION This final tutorial session shows a more advanced use of the SPSD M in black box mode It is not necessary to proceed with this example before conducting research with the SPSD M Those readers who are comfortable with the use of the model thus far are invited to try this last session In this session we will be testing the fiscal impacts on households and governments of introducing an earned income tax credit EITC program The testing of a new program would normally be a glass box application requiring re compilation of the model However for certain types of programs the black box mode is adequate Specifically these cases are where the new program has no implications for personal taxes and are not extremely complicated The technique makes use of the user defined variables and selection facility The earned income tax credit for this example has the following specifications These specifications are not meant to represent a realistic earned income tax credit but they are sufficiently close for the purposes of this example Eligibility Individuals aged 21 years or over are individually eligible if they reside in census families in which chi
22. 16 0 91 12 File Quick_W mpr Sample 1 0000 AGENAME Standard Results for Census Families Copy Table E Output Tables Built In Tables E Table 0 Results for Census Families Quantities Table 1 Results for Census Families by Province Quantities User Tables Distribution Variable x1 000 000 TOTAL Family Units x1000 15252 9 Persons x1000 31510 6 SLID Survey Records 34886 0 SPSD Records 97580 0 Income Base 598271 4 Income Variant 598271 4 Change 0 0 Number of Gainers x1000 Number of Losers x1000 No Change x1000 Gainer s Gain Loser s Loss Total Income Market Income Wages and Salaries Self Employment Income Investment Income Other Income Transfer Income Total Tax Net Transfers Disposable Income Consumable Income Federal Taxes Federal Income Tax UI E Contributions Ul El Benefit Recovery CPP QPP Contributions Dther Recoveries Federal Commodity Taxes Endaral Tranabarn Control Adjustment Variant Tax Transfer Tables Ready STC Source File SPSD ba04 cpr Simulation Directory H Intro SPSM runs Simulation Quick Executable SPSM EXE Version 16 0 Understanding Basic Components Having performed a complete SPSM run we leave aside for the moment the specifics of performing a program run and turn our attention to the several key components that form the basis of the model and any given simulation At a very general level the SPSM accepts as input a set of dat
23. 2 SPSD M Version 16 1 change the type to Control Parameter Include Files cpi and then find the file and click Open The parameters will be read Save the simulation and execute it We will now briefly examine the outputs of the run which can be found under the tables tab They have been reformatted to appear in Classic SPSM format for ease of reading Table 1U Selected Quantities for Individuals by Age Quantity Min 20 21 64 65 Max All Earned income tax credit M 0 0 1007 0 3 8 1010 8 Received EITC Flag Gainer 000 0 0 1475 8 7 4 1483 1 Unaffected by EITC Flag 000 7893 6 6610 4 215 145255 Table 1U seems to indicate that the program has been correctly implemented as specified No benefits are paid to children aged 20 and under Total benefits of 1 billion accrue to 1 5 million individuals There are only 28 900 individuals over the age of 64 This is because the selection facility restricts the sample to census families having children under age 21 In total only an estimated 16 008 600 1483 1 14525 5 Canadians of any age live in such families in 2004 Table 2U Selected Quantities for Individuals by Wages amp salaries Group Wages amp Earned income Averag Received EITC Unaffected by salaries tax credit Benefits Flag Gainer EITC Flag Group M 000 000 Min 0 196 5 638 7255 307 7 7957 4 1 8000 320 5 604 4760 530 2 1338 4 8001 12000 215 0 1081 2448 198
24. 200 201 400 and 400 gotvar will be equal to 1 when a person received variant benefits and zero otherwise Finally we now want to create new output tables We will need to edit two more control parameters XTFLAG and XTSPEC The former turns on the user tabulation facility while the latter will define the tables Visual SPSM Ex1 Tax transfer 2004 Population 2004 Incomes 2004 2004 File Edit Yiew Tools Window Help DRAHA H XTSPEC y _IBASMETH Method of creating base variables Control Parameter Value 2 1 Model Control Parameters 2 1 1 General information 2 1 2 SPSD input files 2 1 3 Database adjustment 2 1 4 Variant Information 2 1 5 Base Information BASALG Control Parameter Value Vv BASMETH INPBASMAS INPMASVARS 2 1 6 Subsampling random number seed 2 1 7 Record selection facility Control Parameter Value 2 1 8 Marginal Tax rate facility 2 1 9 Tuming Point facility drit infobena iafcbena 2 1 10 User defined Variables spdiff splitidiff o 200 400 UVARFLAG label spdiff Increase in benefits UVAR gotvar imfcbene gt 0 2 1 11 Text output facility label gotvar Received variant benefits 2 1 12 Reports 2 1 13 Parameter reporting 2 1 14 Tabular reporting gt 2 1 14 1 Built in tables 2 1 14 2 User specified Tabulation facility _ XTFLAG X tab facility activation flag XTFLAG XTSPEC XTDBLFLAG XTCOLS XTLINES _ XTSPEC X tab specification 2 1 14 3 Di
25. A ed De wes 6 idage PIG ie ae Sats a A das 53 50 18 idsex SER A di da 0 1 0 idcfrh Relationship to census family head 0 1 2 immmkt Market Income e idas 36457 3750 4274 immtran All transfer income O 1222 0 An ASCSTYLE value of 2 produces a report designed to be read using a spreadsheet import Introduction and Overview Guide Page 36 SPSD M Version 16 1 function while 3 produces a report designed to be read using a spreadsheet or a database system An ASCSTYLE value of 5 produces a report designed to be converted into a compressed format that can be read by the SPSM This feature allows users to modify SPSD database files Below is an example of ascsTYLE 5 for one household not all variables values are shown 000001 47 217 2121 34 1 0 0 000 000 042 03 11 135 99 2 2 3 0 5Z 1 0 0 00 00 0 0 00 0 1 0 OD ess SPSM results file mRs The SPSM can produce a special file known as an SPSM results file This file is written using the same data compression techniques as the SPSD files Because of this SPSM results files occupy a modest amount of disk space but they can only be read by the SPSM program The results file is written using the variant results typically so that 1t can be read in as base results in a subsequent run If base results are generated by reading in an existing results file the SPSM operates about twice as fast as 1f results had been calculated on the fly The SPSM result
26. LES In this example we will keep the same tax and transfer change that we included in Session 1 namely we will increase the maximum National Child Benefit Supplement NCBS per child Introduction and Overview Guide Page 43 SPSD M Version 16 1 by 200 However in this example we will compare the results with a base scenario where the change did not occur we will create user variables and we will create user tables The first thing to do is to open the example simulation you created in Session 1 So go to File Open Simulation and then navigate to the Ex1 cpr and open it This scenario includes in its variant scenario all the changes in the tax and transfer system that we need The first thing that we wish to do is to create a base scenario In order to do this type in BASMETH in the Edit parameter box and click Edit The following box opens up BASMETH Method of creating base variables 00 0 xj Value e By default BASMETH is set to zero To find out what zero means open the SPSD M help file by clicking on Help Contents and type in BASMETH in the index You see that when BASMETH is set to zero no base results are used We will want to set BASMETH to 2 in order to create base results using the default tax and transfer algorithm The next thing to do is to create some new variables To do this go to User Defined Variables in the tree under Control Parameters Two parameters can be edited Open them both The firs
27. STC Source File 5PSD ba04 cpr Simulation Directory C Documents and Settings jonejen My Document Simulation Untitled Executable SPSM EXE Version 16 0 We will run the SPSM using the default parameters So click on File Save Simulation and save the simulation somewhere We strongly suggest that you save all your simulations in appropriately named subdirectories Then click on File Execute Simulation Once you have saved the simulation the Visual SPSM will call the spsm executable and run the model A simulation status box will appear at the end of the execution Introduction and Overview Guide Page 9 SPSD M Version 16 1 Simulation Status e 1 SPSM ran with no errors or warnings If the simulation contains errors the status box will inform you and a log window will open EXAMINING THE LOG WINDOW Though you can use Visual SPSM to modify parameters run the simulation and examine output the model itself still invokes spsm exe to do the simulation The log window shows how changes made in the Visual SPSM interface get converted to the input needed for spsm exe This section will go through the log window to explain its contents To open the window after a successful simulation go to View Log If the simulation was unsuccessful the window will open automatically The information that we input using the Visual SPSM is converted into the requisite steps for the classic SPSM In 1 you can see the starting point for the
28. X model It also contains the mathematical description of the underlying Input Output model Tools User s Guide This guide describes various tools and utilities designed for use with SPSD M such as the Introduction and Overview Guide Page 56 SPSD M Version 16 1 spreadsheet interface and parameter file comparison utilities The currently provided auxiliary tools take the form of other executable programs SPSD M REFERENCE MANUAL There are three main ingredients to the SPSD M which are manipulated in various ways to create various tax transfer scenarios the database the algorithms and parameters This manual provides detailed information on the components of each of these three ingredients Algorithm Guide The Algorithm Guide is designed primarily to provide SPSD M users with an understanding of the specific personal tax and cash transfer programs which are simulated together with specific information on how each program was implemented An attempt is also made where possible and practical to guide and caution the user where necessary as to the interpretation of the results The guide is intended for both black box and glass box users Parameter Guide This document provides an explanation of all parameters including control parameters that are part of the SPSM This includes a detailed description of how the parameters are used their values for the various parameter files provided and wherever possible the published source wh
29. a child As a result only those census families with children under 21 will be selected More precisely if SELSPEC evaluates to zero for every member of a specific SELUNIT a census family in this case then that family will be rejected 3 2 1 9 User defined Analysis Variables EH UVARFLAG l UVAR 4 nfempinc idiemp SP idiemp 5 if idage gt 21 6 if nfempinc lt 8000 eitc 15 nfempinc 7 else if nfempinc lt 12000 eitc 1200 8 else if nfempinc lt 24000 LEC 1200 nfempinc 12000 10 else eitc 0 9 label eitc Earned income tax credit 3 The user defined variable facility is used to simulate the EITC program Keep in mind that each user defined variable is evaluated sequentially at the individual level of analysis Consequently expressions should not make reference to user variables that have not yet been Introduction and Overview Guide Page 50 SPSD M Version 16 1 defined 4 nfempinc is the combined employment income from wages and salaries of the head and the spouse of the census family which will be subsequently used for income testing This is accomplished by specifying the employment income of the individual being processed idiemp plus the employment income of the spouse SP idiemp using the modifier SP to indicate the value of the variable should be read from the spouse 5 Benefits will be restricted to individuals over the age of 20
30. abase variables and applies various algorithms to them which in turn produce a set of simulated variables The database and simulated variables are then output in different forms for analysis The entire process is controlled by parameters Any complete simulation involves all of the following four components Database Parameters Simulation Outputs Each of these four components must be understood on its own as well as in terms of its relationship to the other components as shown broadly below Introduction and Overview Guide Page 14 SPSD M Version 16 1 SPSD Database SPSM Table Outputs Microdata Outputs Parameters a This section describes the function and most important features of each of these four components It also describes the ways that these components interact with each other The SPSD database forms the foundation for the entire SPSD M and is discussed first in terms of its scope organization structure and variables The simulator performs all operations on the database including adjustment and screening simulation of modeled variables and reporting results The parameters that control this process are discussed next This is followed by a general discussion of the outputs available from the SPSM The section concludes with an examination of the SPSD M files and their relationship to the components just discussed DATABASE The SPSD was constructed by combining individual administrative data fro
31. ables Available to output routines gt T1Tax UI gt Family Data Histories Expenses PARAMETERS Parameters are used by the SPSM to control every aspect of a program run Introduction and Overview Guide Page 22 SPSD M Version 16 1 Input Output Tables Tax Transfer Parameters Scenario Database Control Adjustment Parameters Parameters Income Payroll Commodity Taxes amp Cash Taxes Transfers e SNA Aggregates Tax Forms e Private e Budgets Sector Forecasts e Redbook SPSM Parameter Types As mentioned earlier the SPSM is driven by over 800 parameters divided into three groups corresponding to three types of files that control three main processes Control parameters specify input and output files for a specific model run and are used to activate model software facilities Database adjustment parameters control the inflation of database money items Tax transfer parameters control the specific functioning of the tax and transfer programs In the case of commodity taxes a set of default parameters is supplied A complete list of parameters organized by subject area can be referenced in the Parameter Guide SPSM parameters provide instructions to the simulator in the following way Introduction and Overview Guide Page 23 SPSD M Version 16 1 Tax Transfer Parameters Scenario Database Income Payroll ee me uSement Taxes amp Cash ra lg Transfers Get Data C
32. ack box version of the SPSM and manipulating the parameter files between runs based on the values found in the default tables See the Tools User s Guide for more information REFERENCE VARIABLE FACILITY Introduction and Overview Guide Page 37 SPSD M Version 16 1 Values of any number of modeled variables produced in an SPSM run can be accessed in a subsequent run by using SPSM reference variable facility The facility permits the simultaneous comparison of any number of simulation scenarios The most common use of the Reference Value Facility is to access user variables produced in a previous run The reference value facility can also be used to replace the values of SPSD variables The user may use this feature to for example model a behavioural response of persons responding to a shortfall of UI benefits by increasing their employment income Example Simulations This section contains several worked examples of SPSD M use They use the Visual SPSM interface They should be performed by the user at his or her computer in the sequence presented here The examples provide guidance on using some of the many SPSD M features The text and results obtained with your computer may not exactly match the results printed in this guide The results on your screen if the example steps are followed exactly should be interpreted as correct This is due to the fact that the documentation sometimes lags the most recent version of the software Please
33. alculate Base Scenario Calculate Variant Scenario Calculate User Variables Selection and Output Routines The Relationship of Parameters to the Simulator Note that control parameters affect every step of the simulation whereas database adjustment parameters are used only once Two sets of tax transfer algorithm parameters are specified one for calculating base results and one for calculating variant results In the Visual SPSM interface the parameters are split into different tabs as can be seen in the following figure Introduction and Overview Guide Page 24 SPSD M Version 16 1 i Visual SPSM Quick Tax transfer 2004 Population 2004 Incomes 2004 2004 SEE File Edit View Tools Window Help ei A De ee AAMTOPT 2 1 Model Control Parameters 2 1 1 General information 2 1 2 SPSD input files 2 1 3 Database adjustment 2 1 4 Variant Information 2 1 5 Base Information 2 1 6 Subsampling random number seed 2 1 7 Record selection facility 2 1 8 Marginal Tax rate facility 2 1 9 Turning Point facility 2 1 10 User defined Variables 2 1 11 Text output facility 2 1 12 Reports 2 1 13 Parameter reporting 2 1 14 Tabular reporting 2 1 15 User defined control parameters if any E EE E Variant Tax Transfer Tables STC Source File SPSD ba04 opr Simulation Quick Executable SPSM EXE Vers Eac
34. ameter file Quick_V mpr The simulation is then run 7 EXAMINING OUTPUT Though all output from the SPSM is written to files the tables it produces can also be viewed Introduction and Overview Guide Page 12 SPSD M Version 16 1 from Visual SPSM Click on the Tables tab on the bottom left of the tree A Quick Tax transfer 2004 Population 2004 Incomes 2004 20045 File Edit View Tools Window Help DEHA san E Output Tables Built In Tables Table 0 Results for Census Families Quantities Table 1 Results for Census Families by Province Quantities User Tables Distribution Control Adjustment Variant Tax Transfer Tables Ready STC Source File SPSD ba04 cpr Simulation Directory H Intro SPSM runs i ii ji Executable SPSM EXE Two of the ten possible default tables were created Table O and Table 1 The format and contents of these tables are fixed Users may not change either their rows or their columns of the table Table 0 is a table for all Canada while Table 1 is a table by province The next snapshot shows the first rows of Table 0 Introduction and Overview Guide Page 13 SPSD M Version 16 1 2 Visual SPSM Quick Tax transfer 2004 Population 2004 Incomes 2004 20045 Table 0 E Ele Edit View Tools Window Help Deeb nee SPSD M Database 16 00 Fri Aug 15 11 12 55 2008 Base Beane No base results Variant Description Current values for Driver Version
35. ased on 12882 non zero observations Minima hdseqhh Maxima hdseqhh 0 32419 1200 4 0 11844 1200 4 0 11844 1200 5 0 3636 1200 5 0 3636 1200 6 Selected Quantiles Q1 335 Pl 11 P90 1200 P20 263 P60 843 Med 713 P2 21 P95 1200 P30 411 P70 980 03 1049 P5 51 P98 1200 P40 547 P80 1136 P10 115 P99 1200 Histogram Plot l l MA 4 4 P1 P10 P20 P30 P40 P50 P60 P70 P80 P99 11 115 263 411 547 713 843 980 1136 The distribution report indicates that the program has been implemented correctly The maximum individual benefit is 1 200 as expected Guide to SPSD M Documentation SPSD M INTRODUCTORY MANUAL The SPSD M is a complex and sophisticated tool for the analysis of the intricacies of Canada s tax transfer system The Introductory Manual is designed to get the user up and Introduction and Overview Guide SPSD M Version 16 1 Page 55 running in a minimum amount of time while providing an overview of the elements of the SPSD M which must be understood to conduct valid research and analysis The SPSD M Introductory Manual consists of three documents How to Run the SPSM Describes how to run the SPSM using both Visual SPSM and Classic SPSM Introduction and Overview This is the current guide whic
36. ative analysis such as regression analysis or the calculation of gini coefficients are not incorporated into the SPSM program The SPSD database files are stored in a compact binary format which is interpretable only by the SPSM Introduction and Overview Guide Page 21 SPSD M Version 16 1 programs The output facility provides users the ability to create files containing subsets of the SPSD cases or variables in several different formats for subsequent data analysis using the SPSM or other software products These formats can be read by the SPSM SAS spreadsheet programs and other analytical software Some output options also are suited to visual interpretation There are a large number of variables potentially available to the output routines The diagram below indicates the broad types of variables and their relation to the SPSM simulator The starting point is on the left with all database variables Next there are two possible sets of modeled variables one for the base case and one for the variant User variables are calculated next as a function of any of the variables created so far Finally reference variables from previous model runs may be read and processed by the output routines Build Database Calculate Base Scenario Calculate Variant Scenario Calculate User Variables Selection and Output Routines Base Variant Database User Reference Results Results Variables 3 Variables Variables ee Vari
37. ch represents the ratio of average employment income to total income for individuals aged 21 to 64 idage gt 21 amp amp idage lt 64 idiemp imitot The term to the right of the multiplication sign says that for any given individual take the total income and divide it by the employment income of that person This produces the proportion of total income accounted for by employment income Now consider the term to the left of the If an individual is over 20 years old and less than 65 years old then the first term will evaluate to 1 and the value of the expression becomes the value of the second term the employment income ratio If however the individual is under age 21 or over age 64 then the first term and consequently the entire expression will evaluate to 0 Note that in this example the end result if tabulated using the X tab facility becomes an average of ratios If we had wanted to examine the ratio of averages we would simply include the relevant terms of the expression in a custom table request PARAMETER EDITING Parameter editing is usually performed using Visual SPSM It can also be done with a text editor prior to opening Visual SPSM and read from a file Parameters types The SPSM uses several types of parameters Different types are checked for validity using different rules The following is a description of the parameter types currently defined FLAG A flag controls whether or not an algorithm or pro
38. come Taxes 2 3 0 Parameter File Description 2 3 1 Database variable activation 2 3 2 Government Transfers 2 3 2 1 Unemployment Insurance 2 3 2 2 Family Allowance ECTE Calculation Sheet July 2004 to June 2005 2 3 2 3 Old Age Security DAS Source CCTB Calculation Sheet July 2004 to June 2005 2 3 2 4 Guaranteed Income Supplement Update Factor CPI 2 3 2 5 Provincial Elderly Programs 2 3 2 6 Federal Sales Tax Credit 2 3 2 7 Federal Refundable Child Tax Credit 2 3 2 8 Federal Child Tax Benefit FCBBAS FCBYNG FCBYNGR FCBUCCB FCBLAG FCBTD FCBRR FCBRRS FCBESR FCBERR FCBERR1 FCBERR2 A FCBERR3 FCBEIS FCBECI FCBEMX FCBETD FCBEIE FCBEIS1 FCBEIS2 FCBEIS3 FCBPI 2 3 2 8 1 Federal Child Tax Benefit for the calendar y E 2 3 2 9 Universal Child Care Benefit j a Control Adjustment Variant Tax Transter Ready STC Source File 5PSD ba04 cpr Simulation Directory H Intro SPSM runs it i it Executable SPSM EXE Version 16 0 Oa dl You then want to replace the value of the parameter of 1511 by 1711 increasing the benefit by 200 You may also wish to change the Source indicating that this is a new value Introduction and Overview Guide Page 41 SPSD M Version 16 1 3 Visual SPSM Ex1 Tax transfer 2004 Population 2004 Incomes 2004 2004 File Edit View Tools Window Help OSHA ao FCBEIST y FCBEIS1 Variant WIS NCBS for first child DER Variant Tax Transfer Parameter Value
39. cting the number of households processed to those of interest Introduction and Overview Guide Page 31 SPSD M Version 16 1 A string parameter contains an expression which is evaluated for each individual in the household If the result of the evaluation is non zero the individual is considered to be selected If an individual is selected then everyone in the same family unit is also selected irrespective of the evaluated value of the selection expression for other individuals In other words if at least one person in the family unit is selected the entire family unit is selected To compute taxes and transfers correctly SPSM always simulates entire households Because of this selection has no effect on the values of any variables modeled or database at the individual level If however an examination of the database variables in the selection expression indicates that no individual in the household could possibly be selected then SPSM skips immediately to the next household This can result in a considerable decrease in SPSM execution time USER DEFINED VARIABLE FACILITY As already discussed the SPSM has two distinct modes of use termed black box and glass box The glass box mode provides the user with considerable flexibility to design new algorithms and create new variables but it can be somewhat complicated to use and requires some knowledge of programming The user defined variable facility UVAR allows the user to creat
40. de we will need to create and label a new variable dispinc which shows disposable income after the new tax credit 11 gainer is true 1 if the individual gained from the EITC Otherwise the value is zero 12 nochange is true 1 if the individual was unaffected by the EITC Otherwise the value is 0 13 We want to examine the results across three different classification dimensions These new variables allow us to validate the SPSM implementation of the new EITC program and to measure the distributive effects of that program The agegrp variable breaks the sample Introduction and Overview Guide Page 51 SPSD M Version 16 1 into three groups according to age These groups are use to produce custom Table 1U 14 The empigrp variable has five different values depending on the level of employment income 15 The dispgrp variable has ten different values depending on the level of disposable income 16 2 1 15 1 Built in tables TOFLAG 0 Table 0 request flag 17 2 1 15 2 User specified Tabulation facility XTFLAG il X tab facility activation flag XTSPEC X tab specification 1181 IN eitc gainer S 3 nochange S 3 agegrpt IN empigrp eitc eitc gainer L Average Benefits gainer S 3 nochange S 3 IN dispgrp eitc gainer S 3 nochange S 3 scfrecs HHH 19 2 1 15 3 Distributional Analysis Facility HHH DISTFLAG 1 Distribution facility activation flag DISTUNIT
41. deral Child Benefit Supplemen imfcbene units Average change in NCBS Table 2 Classification variables and distributions Here is the syntax of the second table IN spdiff gotvar S 0 gotvar M spdiff L Distribution of recipients The second table gives the distribution of people who receive the new benefit by the amount received It is a two dimensional table with the addition of a classification dimension spdiff The same variable gotvar is tabulated twice gt the difference is that the second variable uses the M qualifier to normalize the variable The results show that thought the average change in benefits 355 as seen in table 1 47 1 of people received less than 200 Introduction and Overview Guide Page 46 SPSD M Version 16 1 Table 2U BARK SPSD M Database 16 00 Fri Aug 15 13 53 36 2008 Base Description Current values for 2004 Driver Version 16 0 91 12 File Ex1_B mpr Variant Description Increase of the NCBS by 200 per child Driver Version 16 0 91 12 Fe Ex1_Y mpr Sample 1 0000 AGENAME Standard Selected Quantities for Individuals by Increase in benefits Copy Table Increase in benefits Received variant benefits Distribution of recipients 0 0 566045 0 397353 0 239645 0 1203043 0 Table 3 Family tables and records Here is the syntax of the third table CF cfnkids imfcbene imfcbene gotvar L Average change spsdrecs The final table
42. deral taxes are then calculated Then the federal refundable tax credits child tax credit and sales tax credit are calculated This is followed by provincial taxes Sales amp excise taxes are calculated next by applying Input Output based effective sales tax rates calculated with COMTAX to observed family expenditures and scaled to be consistent with simulated disposable income Reporting variables for output are calculated as the last step of the driver algorithm Simulated variables as opposed to database variables are calculated either once or twice in the simulation phase Base result variables if requested are calculated first followed by variant variables Base results if generated at all may be read from a file or calculated from the standard or alternate algorithm Variant results if generated must be calculated from the standard or alternate algorithm alternate algorithms may only be created in glass box mode Base and variant results have independently specified tax transfer algorithms and parameters Distinct sets of result variables are maintained for both the base and variant so that the user may compare the two scenarios in terms of any combination of variables at any level of analysis User Variables Although there are hundreds of variables available in the SPSD M users will often wish to create their own variables for reporting purposes This is done by manipulating the database and modeled variables The user may creat
43. different levels of analysis e g household census family individual The Visual SPSM program allows for people unfamiliar with the command environment to use the SPSM by providing a Windows based method to modify parameters run the model and examine the resulting output A help facility provides information on the use of the model as well as a handy reference to parameter lists Some highlights of the model are Introduction and Overview Guide Page 4 SPSD M Version 16 1 e The user expression facility allows the user to create name and access in subsequent runs new variables that can be used for reporting purposes without the need for any C language programming e The record selection facility allows the user to specify a database subset in terms of any combination of database or modeled variables For example a user could create a condition with an alternate definition of income and then select all economic families with less than a specified amount of that income e Marginal tax rate analyses can be performed in a single run of the model e Two distinct tax transfer systems can be run simultaneously The two systems can be compared using any combination of variables in the same run Base and variant runs may be differentiated on the basis of parameter inputs alternate algorithms glass box or both Additionally through the use of auxiliary input databases users may compare the results of any number of different simulation sc
44. e classification variables by specifying a continuous or discrete variable together with a set of breakpoints which define the class boundaries Analysis variables may also be created by specifying an expression which manipulates logically and or algebraically any of the database or modeled variables User variables may be given names and labels as well as level labels for classification variables Screening Cases and Output Phase Users may wish to restrict the calculation of results to a certain subset of households or to a certain type of individual or family on the database This can serve both efficiency and analytical purposes This screening can be based on modeled as well as database variables Therefore it follows the calculation of base and variant results For example households having no children may be selected or individuals with no employment income excluded Screening affects all of the SPSM output facilities in any given program run The output phase is the last step of the simulator and is designed to produce a series of outputs for different purposes Output is either intended to be looked at or printed on the one hand or to be input to another computer program on the other There are two main ways of producing printable aggregate tables either by using one of the five supplied default tables or by creating your own customized tables See the user facilities section below for further details Certain techniques useful in quantit
45. e new reporting variables in black box mode It allows the user to perform many analyses that would otherwise require programming changes to SPSM A new variable can be used just like any other SPSD M variable SPSD M variables have built in labels which are used by the SPSM reporting and output facilities The user can supply a label to an analysis variable or it will use defaults SPSD M user variables also have an associated output precision which gives the number of digits after the decimal point to use when formatting the variable in reports There are many applications for these variables Counts of individuals or family units with specified characteristics take up rates averages percentages and even new benefit functions can easily be incorporated in black box mode CREATING TABLES Built in Tables The SPSM is capable of producing ten different built in tables The tables have been designed to contain a large amount of data which can be processed to produce additional statistics So for example the tables do not provide information on average OAS benefits However they do provide information on the total value of OAS benefits as well as the number of recipients of OAS which can then be used to determine average benefits The tables are grouped into five sets of pairs The first table in each pair contains values in millions of dollars for over fifty selected variables The second table in each pair contains the number of persons
46. enarios in a single execution of the SPSM e A comprehensive set of default tables includes dollar amount and persons reporting for over 40 variables with breakdowns by province income class family type and proportion above or below specified income levels by family size and type e Across tabulation facility allows the user to specify custom N dimensional tables using database model or user defined variables The user is given full control over output formats precision level of analysis and labeling of the tables e Output facilities allow the user to create custom files in compressed binary format or any of three ASCII file formats These files are intended for subsequent analysis using the SPSM or other software packages and can contain any combination of database or modeled variables e Performance has been given high priority in the design of the SPSM but still varies depending on the hardware environment the simulation request and the types of output specified The SPSM can be run in batch mode to allow a series of simulations to run unattended We have tried to make the documentation as clear and concise as possible and the software has been extensively tested Still errors are possible If you encounter any problems with the software or documentation contact Statistics Canada directly at 613 951 3774 Quick Start The SPSM can be very simple to operate and can give fast results A basic understanding of the SPSM structu
47. ere the values were obtained Variable Guide This document contains reference information on each SPSD M variable The first part of this document is organized by subject area The second part consists of an encyclopaedic reference to each SPSD M variable and is organized alphabetically The reference section is for determining the detailed definition characteristics and use of a particular variable Database Creation Guide This guide describes the general process step by step of constructing the micro statistically representative SPSD Introduction and Overview Guide Page 57 SPSD M Version 16 1
48. ersion 16 1 Table 1 Totals changes and averages Here is the syntax again of the first table IN _imfcbene imfcbene imfcbene imfcbene units imfcbene gotvar L Average change in NCBS It is a table of individuals which will contain five columns The first two will be the base and variant values of NCBS with the base variable being distinguished by the leading underscore When a variable is prefixed by O 1t means that the difference between the variant and the base will be produced which is what is output in the third column Finally the fourth column represents the average change in benefits for all individuals whereas the fifth is the average change for people who received benefits The units keyword represents individuals in an Individual level table The last two columns had their labels overwritten using the L qualifier The results of the table can be seen below This change cost 427 million with an average change of 14 person or 355 person who received benefits Table 1U EX SPSD M Database 16 00 Fri Aug 15 13 53 36 2008 Base Description Current values for 2004 Driver Version 16 0 91 12 File Ex1_B mpr Variant Description Increase of the NCBS by 200 per child Driver Version 16 0 91 12 File Ex1_W mpr Sample 1 0000 AGENAME Standard Selected Quantities for Individuals Copy Table Base Total Federal Child Benefit Supplement M Total Federal Child Benefit Supplement M Change in Total Fe
49. es are meant to be followed in order They provide general information on using the SPSM as well as details on specific SPSM features Some of the SPSD M user facilities are illustrated in these examples The final section entitled Guide to SPSD M Documentation gives an overview of the contents of the other help guides included with the SPSD M package and provides some guidelines on their effective use OVERVIEW OF THE SPSD M The Social Policy Simulation Database and Model SPSD M is a tool designed to analyze the financial interactions of governments and individuals in Canada It allows the assessment of the cost implications or income redistributive effects of changes in the personal taxation and cash transfer system There are four basic elements to the SPSD M a database the SPSD a model the SPSM which is comprised of a set of simulation algorithms data retrieval and reporting software and user documentation 1 The SPSD is a non confidential statistically representative database of individuals in their family contexts with enough information on each individual to compute taxes paid to and cash transfers received from government 2 The SPSM is a static accounting model which processes each individual and family on the SPSD calculates taxes and transfers using algorithms that simulate legislated or proposed programs and reports on the results A sophisticated software environment gives the user a high degree of control over the
50. f a check of whether the benefit was following the rules set out then the classification variable ought to have been defined using head and spouse earnings nfempinc Table 3U Selected Quantities for Individuals by Base disposable income group Base Earned Received Unaffected SLID disposable income tax EITC Flag by EITC Records income credit M Gainer Flag 000 group 000 Min 5000 104 6 204 1 7734 9 17152 5001 10000 189 2 245 1 816 2 2339 10001 15000 230 3 28 655 4 2111 15001 20000 192 5 281 0 639 1 2046 20001 25000 143 7 222 1 657 8 2041 25001 30000 66 8 110 5 724 0 1969 30001 35000 333 53 06 705 2 1709 35001 40000 14 1 24 3 564 0 1360 40001 45000 9 8 12 53 421 2 1009 45001 Max 26 6 42 9 1607 7 3366 All 1010 8 1483 1 14525 5 35102 Table 3U shows the distribution of EITC benefits over individuals by disposable income group Benefits are paid to persons with high incomes because sources of income other than from employment are not being taken into account in determining benefits Introduction and Overview Guide Page 54 SPSD M Version 16 1 Distribution report Earned income tax credit for Individuals 141260 128378 Total observations Zero observations Descriptive Statistics Sum of weights 1483142 Weighted Sum 1010778879 Weighted Sum of Squares 918650322290 Weighted Mean 682 Extreme Values with associated household numbers The following statistics are b
51. families or households controlled by the user which had some non zero value for the variable reported The five groups produce the following types of tables Table 0 and OA Canada totals Table 1 and 1A Totals by province Introduction and Overview Guide Page 32 SPSD M Version 16 1 Table 2 and 2A Totals by income group Table 3 and 3A Totals by family type Table 4 and 4A Totals by proportion of a specified income threshold The user has only limited control over the format and contents of these tables The user specifies a level of analysis which applies to all of the built in tables He or she can also specify the variable as well as the cut points to be used in determining the columns of Table 2 Thus the user can easily create a table of results by age A separate utility allows any of these built in tables to be transformed into a format which is readable by Excel spreadsheets An Excel spreadsheet which produces auxiliary statistics from these tables is also included User specified X tab Facility The designers of the SPSM recognize that the built in tables will not always meet the analyst s needs Thus a powerful facility that allows a user to create specific customized tables has been provided A brief description can be found in the User s Guide while the separate auxiliary guide XTab User s Guide presents detailed documentation on the X tab facility An individual tabulation request consists of multiple components It ty
52. ge 15 SPSD M Version 16 1 The richness and complexity of the database permit comprehensive simulations but require some degree of familiarity if the data are to be processed correctly and valid conclusions drawn The fundamental family structure of the data as well as the organization and range of variables and their sources are briefly presented here For a full discussion of the variables and database consult both the Variable Guide and the Database Creation Guide in the Reference Manual A listing and brief description of the six major types of database variables follows Demographic Variables Demographic variables include age sex province and family structure A number of other classification variables such as industry occupation educational status labour force characteristics and housing tenure are also present These variables are taken from the Survey of Labour and Income Dynamics SLID of about 30 000 households Income Variables A number of variables giving individual income for persons aged 15 years or older by source are present Sources include employment income self employment income dividends interest and capital gains These variables are drawn from the SLID except for high income individuals where they are derived from personal income tax information UI EI Unemployment Insurance Employment Insurance Variables Variables providing some detail on the structure of up to two UI EI claims for each indiv
53. gram or calculation is performed OPTION An option parameter allows the choice of one of two or more options SCALAR Scalar parameters take a single numeric value with or without a decimal point STRING A string parameter is a single line or multiple lines of text Introduction and Overview Guide Page 30 SPSD M Version 16 1 VECTOR A vector is a single column of numbers The first value is the number of values which follow LOOKUP TABLE A lookup table contains a single value followed by a set of three columns The first column represents the input value such as taxable income The second column represents the output value corresponding to the input value in the same column The third column represents the marginal change in the output value for the next increment or tax bracket TABLE A table is a numeric array with an arbitrary number of rows and columns The array is preceded by a number indicating the number of rows which follow SCREENING RECORDS A user will not always wish to simulate scenarios for every individual on the database either because of the time required or because the simulation is applicable to only some sub group of the population In these instances the user will want to make use of the sub sample facility or the selection facility By using random number stream variables the user may employ these facilities to create take up rates in black box mode Sub Sampling The SPSM runs quickly on modern computers
54. h is designed to give an overview and introduction to the SPSD M It describes the construction of an SPSM simulation run and also contains several worked examples of model use Much of the material presented here is also presented in the other guides in a more comprehensive fashion Addendum This document outlines the modifications that the SPSD M has undergone subsequent to the previous release of the SPSD M Users will note that the chapter headings in this Addendum correspond to guides in the manuals SPSD M USER S MANUAL The SPSD M has been designed and created by senior analysts who actively perform simulations using the tool It contains powerful features which allow a broad range of analysis options Comprehensive descriptions of these features are contained in the five guides in this manual User s Guide This guide describes how to run the SPSM in black box mode i e without making any changes to the C language source code The SPSM user facilities are each described in a complete fashion User X tab Facility This auxiliary guide contains an expanded more pedagogical treatment of the user defined X tab facility which is described in a complete though terse fashion in the SPSD M User s Guide Programmer s Guide Intended for use by the glass box user this guide describes how to make programming changes to the SPSM model Commodity Tax Model User s Guide This guide describes the operation of the Commodity Tax COMTA
55. h of the three types of parameter files are now discussed in turn Control Parameters A control parameter file contains specifications for parameters used to control SPSM general operations It gives information for such things as input and output file specifications record selection requests cross tabulation and other user facilities It does not give information on the parameters used to specify database growth or parameters of the tax transfer system This information is provided by separate parameter files The majority of control parameters are used to control the SPSM user facilities The control parameter file also acts as documentation for a program run because it contains all the information necessary to make the run Control files normally have a cpr extension Database Adjustment Parameters Database adjustment parameters allow the values of variables on the database to be changed in order to represent dollar values in calendar years other than 2004 For example the dividend income of each individual on the database is multiplied by the database adjustment parameter GFIDIV If in 2005 the value for Ontario is 1 201 all dividend income is 20 1 percent higher Some of the database adjustment parameters are more structural in nature For example the parameter PTF specifies the low income cutoff thresholds for the default tables and the parameter UTTARGYRMAX establishes maximum insurable earnings levels for unemployment insurance If an
56. ibed briefly below Introduction and Overview Guide Page 18 SPSD M Version 16 1 Adjust Data Calculate Base R Scenario Simulator Calculate Variant Scenario Calculate User Variables Table Selection and sic T aa Output Routines Database Adjustment The SPSD is based on surveys and administrative data collected for the 2004 calendar year Adjustment of this data may be required for several reasons The user may wish the incomes to represent the incomes in a more recent year such as 2007 In this case the user would then supply estimates of growth rates for income by source between 2004 and 2007 The user may also wish to make adjustments for simulation purposes in the 2007 year For example known under reporting of alcohol expenditures may be treated by scaling each household s alcohol expenses or a deduction item could be scaled down to zero to represent a restriction of a certain tax measure Finally the user may wish to adjust the weights of individuals and households to reflect alternative demographic assumptions Prior to the calculation of any taxes or transfers each dollar denominated database variable is multiplied by a single corresponding database adjustment parameter There are two key exceptions to this Employment income comprising about 70 of total income is given more rigorous treatment due to its relative importance in the overall tax transfer system Employment income is therefore adjusted by industry
57. idual in receipt of UI on the SPSD are given Included are data related to the start date of a claim the type of claim and weeks on UI in the various phases Variables come from matching SLID EI claimants with a 10 random sample about 400 000 records in the base year of Human Resources Development Canada administrative data files on individuals in receipt of UI EI Tax related Variables To complete a tax form one requires certain individual non income variables These include RRSP contributions tuition fees medical expenses and charitable donations These variables are imputed from a stratified sample of Canada Revenue Agency T1 individual income tax returns the same sample that underlies the Canada Revenue Agency s annual Greenbook publication Consumption Pattern Variables Each household on the SPSD has an associated expenditure pattern giving household expenditures by 48 distinct types of commodity The Survey of Household Spending SHS is used to impute this information on expenditure patterns Household Weights Household weights are stored on separate files There is a series of weight files Introduction and Overview Guide Page 16 SPSD M Version 16 1 corresponding to population estimates for the years from 1991 to 2012 A full list of the available variables can be found in the Variable Guide Level of Analysis The tax transfer system considers the family context of individuals in determining the value of man
58. iew Guide Page 39 SPSD M Version 16 1 Visual SPSM Untitled Tax transfer 2004 Popul File Edit View Tools Window Help DZS nE Em ES E 2 3 Government Transfers and Personal Income Taxes 2 3 0 Parameter File Description 2 3 1 Database variable activation 2 3 2 Government Transfers 2 3 2 1 Unemployment Insurance 2 3 2 2 Family Allowance 2 3 2 3 Old Age Security 04S 2 3 2 4 Guaranteed Income Supplement 2 3 2 5 Provincial Elderly Programs 2 3 2 6 Federal Sales Tax Credit 2 3 2 7 Federal Refundable Child Tax Credit 2 3 2 8 Federal Child Tax Benefit FCBBAS FCBYNG FCBYNGR FCBUCCB FCBLRG FCBTD FCBRR FCBRRS FCBESR FCBERR FCBERR1 FCBERR2 FCBERR3 FCBEIS FCBECI FCBEMX FCBETD FCBEIE FCBEIS2 FCBEIS3 FCBPI 2 3 2 8 1 Federal Child Tax Benefit for the calendar y m 2 3 2 9 Universal Child Care Benefit E Control Adjustment Variant Tax Transter Ready STC Source File SPSD ba04 cpr Simulation Director it i it Executable SPSM EXE Version 16 0 Oa dl Double click on FCBEIS1 to open the Parameter window You see the following screen Introduction and Overview Guide Page 40 SPSD M Version 16 1 Visual SPSM Untitled Tax transfer 2004 Population 2004 Incomes 2004 2004 File Edit View Tools Window Help DED HA N FCBE1S1 y FCBEIS1 Variant WIS NCBS for first child Variant Tax Transfer Parameter Value 1511 0g E 2 3 Government Transfers and Personal In
59. ile Edit Yiew Tools Window Help Cee HAS FCBEISS y Edit II MPRDESCE Variant English description of tax transfer parameter f BAE Variant Tax Transfer Parameter Value MPRSFILE TARGETYEAR 2 3 1 Database variable activation E 2 3 2 Government Transfers 2 3 2 1 Unemployment Insurance 2 3 2 2 Family Allowance 2 3 2 3 Old Age Security OAS 2 3 2 4 Guaranteed Income Supplement E o Increase of the NCBS Source User defined Update Value LABELE 2 3 2 5 Provincial Elderly Programs 2 3 2 6 Federal Sales Tax Credit 2 3 2 7 Federal Refundable Child Tax Credit 2 3 2 8 Federal Child Tax Benefit _ FCBEIS1 Variant WISANCBS for first child FCBBAS Variant Tax Transfer Parameter Value FCBYNG 4 FCBYNGR 7 1711 00 FCBUCCB inceasedby 200 2 2 FCBLRG Source Increased by 200 FEBTD Update Factor CPI 1 FCBRR FCBRRS FCBESR _ FCBEIS2 Variant WIS NCBS for second child FCBERR FCBERR1 Variant Tax Transfer Parameter Value FCBERR2 FCBERR3 g 1495 00 FCBEIS A increased by B200 FCBECI Source Increased by 200 FCBEMX Update Factor CPI FCBETD oe FCBEIE FCBEIS1 _ FCBEIS3 ariant WISANCBS for each additional child FCBEIS2 FCBEIS3 Variant Tax Transfer Parameter Value FCBPI 2 3 2 8 1 Federal Child Tax Benefit for the 1415 00 2 3 2 9 Universal Child Care Benefit vi i gt Source Increased by 200 Control Adjustment Variant Ta
60. inputs and outputs to the model and allows the user to modify existing programs or to examine proposals for entirely new programs Within the SPSM there are two models configured as two distinct computer programs 2a The central program the SPSM is a microsimulation model which calculates taxes and transfers for individuals and families These calculations are performed for everyone on the SPSD and then aggregated to obtain estimates The SPSM is a static impact model and is therefore not intended to simulate how an individual s behaviour is likely to change in response to various policy options The SPSM program includes software which allows the user to perform tabulation and database retrieval operations on the database information 2b The commodity tax model COMTAX is a macro economic Input Output based model This model is not currently released with the SPSD M package but rather the results from it are COMTAX provides estimates of effective federal and provincial retail sales tax equivalent commodity tax rates by province household expenditure category and tax type This model is required because many commodity taxes are levied at intermediate stages of Introduction and Overview Guide Page 2 SPSD M Version 16 1 production not at the final retail stage Rates calculated by the COMTAX model can be input as parameters into the SPSM to obtain estimates of the commodity taxes paid both directly and indirectly by any given household
61. ion and sorting capabilities such as SAS SPSS GAUSS etc Case by case results can also be used as input to the SPSM to provide base result variable values Finally case by case output can be printed or viewed on the screen for debugging or other analytical purposes For example if a user wished to examine in great detail the five households who had lost the most disposable income in a comparative simulation he or she would first isolate the household sequence numbers of the top five Introduction and Overview Guide Page 26 SPSD M Version 16 1 losers using the distributional analysis facility A second run which would select only the five households of concern and print out all variables for those households could then be submitted Aggregate results take three distinct forms built in tables whose format is fixed by SPSM user specified cross tabulations or the report produced by the distributional analysis facility Tables can be printed analyzed directly or used as input in other software packages Spreadsheet packages can be particularly useful for manipulating the results from aggregate tables Please see the Tools User s Guide for more information on the spreadsheet interface facilities supplied with the full SPSD M DISPOSABLE AND CONSUMABLE INCOME An important distinction to keep in mind when using the SPSD M is the difference between disposable and consumable income The analysis of federal and provincial taxes paid by indi
62. ldren under the age of 21 years are present Maximum Maximum benefits are 1 200 for each eligible person Benefit Income Test Income testing will be based on the employment income of an individual plus the employment income of their spouse if present Introduction and Overview Guide Page 48 SPSD M Version 16 1 Turning Points Benefits begin with the first dollar of earned income At 8 000 dollars of employment income the benefits reach the maximum and continue at that level until 12 000 of earned income where they begin to be reduced Reduction Rates 15 of earned income is payable as a benefit up to a maximum of 1 200 After 12 000 of earned family income maximum benefits are reduced by 10 for each additional dollar of earned income The above specifications can be represented by the following graph 1 500 1 200 1 000 S 15 Benefits A 10 500 8 000 12 000 Family Income 24 000 Figure Earned Income Tax Credit Benefit Structure This example makes use of a partial include file which contains the parameters that we wish to modify To create this simulation you need to open a new simulation in Visual SPSM for 2004 and then go to File Read Parameter File and then read the file named eitc_EN cpi which can be found in the spsm example directory in the location where you installed spsm These partial include files are text files and can be examined using a program like NotePad The
63. level are aggregated to another higher specified level for reporting purposes For example individual disposable incomes can be aggregated to census family disposable income Some of the information from the household level can be passed down for reporting at lower levels For example a table on individual capital gains by province would draw on the household level province variable All modeled variables are assigned at the individual level The level of analysis must be specified for the production of default tables user defined cross tabulations and text output files A level of analysis must also be specified for the selection facility which causes results for certain user specified units of analysis to be excluded from processing and or results The facility for displaying the univariate distributions of variables also makes use of a level of analysis The default level of analysis varies depending on the application Variable Types Variables in the SPSD M can be grouped in two broad categories Nominal or ordinal variables whose values denote membership in distinct categories are called class variables in this documentation They may also be referred to as classificatory categorical or Introduction and Overview Guide Page 17 SPSD M Version 16 1 classification variables An example of a class variable is idsex which records the sex of an individual Variables which take numeric values on which arithmetic operations can be meaningf
64. ly be written using the variant results Implicit in the diagram is the output of modified database adjustment and tax transfer parameter files during the dialogue SPSM User Facilities The SPSM user facilities create a powerful and flexible environment for the analysis of various tax transfer scenarios All of the SPSM user facilities are controlled by parameters in the control parameter file This section describes the purpose of each facility and provides an overview of its use USER DEFINED VARIABLES One of the powerful features of the SPSM is the ability to evaluate user specified expressions These expressions allow users to create their own variables as logical and arithmetic manipulation of other SPSD M variables The expressions can be used in many of the SPSM user facilities described below Expressions can allow users to simulate entirely Introduction and Overview Guide Page 29 SPSD M Version 16 1 new tax and transfer programs totally within the black box mode The following elements may be combined to form valid user expressions Variables Any database modeled or user defined variables Operators Logical and amp amp or Il not comparative lt lt gt gt and arithmetic Constants Any number Parentheses To control the order of evaluation of expressions Level of analysis override The level of analysis of a variable For example the following expression could be used to produce a variable whi
65. m personal income tax returns and unemployment insurance claimant histories with survey data on family incomes and on expenditure patterns The techniques used to create the database and avoid confidential data disclosure include various forms of categorical matching and stochastic imputation While no one record on the database contains information for the same individual from the four bases the database has been constructed in such a way as to provide a micro statistically representative sample of Canadians The SPSD can be used to represent the population of Canada commencing in 1991 This is done through the use of different sets of household weights that embody demographic data and projections by age sex and province for years beyond the database year Certain adjustments have been made in SPSD to force agreement between data and known control totals For example survey weights have been adjusted to ensure that the population by age and sex corresponds to census estimates and the number of high income Canadians corresponds to the number reported by Canada Revenue Agency Further adjustments have been made to compensate for item non response in the surveys e g to increase the number of families receiving social assistance It should be noted that the SPSD coverage does not extend to the Yukon Nunavut or Northwest Territories persons residing on reservations or armed forces personnel residing in barracks Introduction and Overview Guide Pa
66. no nnnnncononnannonannnconos 55 SPSD M Introductory Med 55 How to Runthe SPSM cnc uaine e a i n 56 Introduction and OVervieW ensien nioi ei A E A E E EA 56 O a aban dee ie EN 56 SPSD M User s Manta iia a iii sede 56 Users Cuida an csi 56 User X tab Pacto 56 Programmer US ds 56 Commodity Tax Model User s Guide oooooconnnocccooncccnoncnononcnononncconnnccnanacnnnnos 56 Tools Users 1106 cata en 56 SPSD M Reference MadVal a di 57 POUT GTI IS wo a e E ERE TIIS 57 P rameterG ide iii A A A Sek AA a a eE 57 Variable Guide aiii ii de Wisk Rass hed a ee 57 Database Creation Guide cccccccccccccccccssessscsccccccccessssesccsccseeuseessesccsccseeueeeees 57 Introduction Welcome to the SPSD M This guide presents an introduction and overview of the product and a description of the basics required to use the model It should be read immediately after installing the SPSD M and before you attempt to use the program for the first time Most of the material contained in this guide is covered in greater detail in the User s Manual and Reference Manual What we do here is present you with an introduction sufficient to get you up and using the model quickly Once familiar with the SPSD M users of the full package can restrict their use to the User s Manual and the Reference Manual This software is complex The SPSD M is a highly flexible tool with a vast number of independently controllable interrelated parts It is designed to be easy
67. oduce a program run e To provide case by case information on simulation results e To provide tabular aggregate information on simulation results Outputs which document the program run are stored in the various specified parameter files These parameter files are output in a self documenting format with parameters labelled and arranged in sections These files may be viewed on the screen or printed if desired An output control parameter file is always produced It contains among other things input and output files used in the run The run can thus be duplicated using the output control parameter file in a subsequent run Certain of the control parameters are informational and are not directly modifiable by the user An example is ALGDESC that displays which version of the tax transfer algorithm was used for the standard and alternate tax transfer algorithms If the user has modified database adjustment parameters or tax transfer parameters in the user dialogue an output parameter file of the appropriate type including the specified changes is produced Case by case results are useful for a number of reasons They can be used as input to other software programs If for example a user wished to perform a regression analysis on SPSD M variables he or she would create a dataset containing only the variables of interest for each household or any other level of analysis That file would be read and processed by other analytical software with regress
68. ort has been produced for all non zero values of imccea showing the skewed truncated shape of the density function for the tax expenditure The bi modal distribution reflects the maximum claim for families with different numbers of children MARGINAL TAX RATE FACILITY The marginal tax rate is defined as the proportion of an extra dollar of income that is taxed It is a useful concept because it measures the extent to which incentives to obtain additional income are reduced by the tax transfer system SPSM provides a facility to compute marginal tax rates When the facility is activated the tax transfer system is applied twice to each household once to the original incomes and once to the incremented incomes and the resulting change in consumable income is noted The definition of marginal tax rate given above is not complete To calculate a marginal tax rate one must in addition specify the source of income being incremented the amount of the increment to income and which individuals are to receive the increment The change in consumable income at the individual level can then be aggregated to produce marginal tax rates at different family levels of analysis Marginal tax rates differ depending on the family level of analysis Consider a married couple where one person has zero income If 500 is given to the individual with no income that person s marginal tax rate would be zero The consumable income of the person s spouse would decrease h
69. ovincial GIS supplement programs Federal Child Benefit GST Tax Credit Commodity Tax Model Eleven different tax types accounted for including Federal Import Duties Provincial profits on liquor commissions Federal Fuel Taxes Provincial Fuel Taxes Provincial Retail Sales Taxes Introduction and Overview Guide Page 3 SPSD M Version 16 1 Cascading effects between taxes Determination of household expenditures net of implicit commodity taxes The SPSM is written in the C programming language Changes to the tax transfer model algorithms can be made in two distinct ways the black box or the glass box mode The majority of SPSM analyses operates in black box mode e When using the model in the black box mode a user would specify changes to one or more of the over 800 tax transfer parameters In this mode the user can change levels and rates affecting various benefits taxes and eligibility requirements and can also specify a sub population that will be modeled e The glass box mode is designed for use by persons who wish to develop entirely new algorithms or to change existing algorithms Glass box users can write a new or modify an existing algorithm in the C programming language and then recompile the model The new model may then be used in black box mode The user need not be a C language expert in order to use glass box mode but should be experienced with some high level computer language The SPSD
70. owever due to a reduction in the married tax credit deduction Hence the marginal tax rate of the spouse would compute to an infinite value since the spouse s taxes have increased even though he she received no additional income Considered as a family however the marginal tax rate would evaluate to a reasonable value Introduction and Overview Guide Page 35 SPSD M Version 16 1 CASE OUTPUT FILES In addition to tabular data the SPSM can write out information from the database and model to a data file in a number of different formats These files contain the specified sub sample of an individual SPSM program run and can be used for subsequent analysis using either the SPSM a text editor or another software product The cases written can be at any level of analysis and may include any database or modeled variables For example an output file could be created containing the age sex census family type and incomes of all individuals aged 18 to 64 Alternately a file containing the urbanization class province residential tenure number of children and government cash transfers of all census families in Alberta could be produced Text Output Facility prn The SPSM text output facility creates a character file containing case by case micro data information One can view it using Visual SPSM or one can use it as input into some other computer program such as a spreadsheet database system or other SPSM facility The variables whose value
71. pically begins with the specification of the relevant unit of analysis i e individual 1N nuclear family NF census family cF economic family EF or household Hu If the tabulation request does not include a unit specification a default unit of individual IN applies The remainder of the tabulation request consists of one or more levels separated by asterisks One of the levels the tabulation level indicates the item or items to be tabulated Any remaining levels are classification levels They specify the particular pattern of categorization desired in the table Naturally there are some restrictions on just what the X tab facility can tabulate but the design of the SPSM makes it quite flexible For starters the analyst can tabulate any analysis variable any non categorical variable available in the SPSD or calculated in the SPSM Complete lists of these variables appear in the Variable Guide As well the analyst can tabulate any of the user defined variables Further the analyst can define on the fly the desired tabulation expressions constructing them from any of the preceding types of variables and appropriate mathematical operators An example of a table request is EF hdprov units CF immtot units immtot units hdtenur This request would generate two tables The first would contain values for the number of economic families in each province as well as a total row The second table
72. re is all that is required It should be kept in mind however that the SPSM is also a highly complex tool The multi level database and numerous parameters and facilities give great flexibility but can lead to confusion if many simultaneous changes are attempted For this reason the SPSM makes extensive use of default parameter files and Introduction and Overview Guide Page 5 SPSD M Version 16 1 built in documentation features The user can always begin from the 2004 defaults alter various settings and examine the results The supplied SPSD M 2004 default parameter files are configured to simulate the 2004 legislated tax transfer system while producing two default tables After first briefly examining the SPSM structure this section will describe how to make a program run using these default files The section concludes with an examination of the output and a general discussion of how to view your results SPSM STRUCTURE As already mentioned the SPSD M models are configured as two distinct executable computer programs The central program SPSM calculates personal income taxes sales taxes and government cash transfers The other program COMTAX executes the macro economic commodity tax model that provides parameters for input to the SPSM The COMTAX program is not available and its execution is not discussed here However results from it are incorporated into parameter files in the form of effective sales tax rates Default SPSM file
73. s apply these parameters to household expenditures to estimate individual commodity taxes Any execution of the SPSM program has the following basic structure SPSD Database Table Outputs SPSM Parameters SPSM Results Figure 2 SPSM Program Run Structure Microdata Outputs Microdata on individuals and households as well as parameters are specified inputs to the SPSM Optionally results from a previous SPSM run may also be input into subsequent runs The SPSM then performs the simulation calculates results and outputs reports and data files Introduction and Overview Guide Page 6 SPSD M Version 16 1 The SPSM is driven by over 800 parameters that control three main processes Control parameters specify input and output files for a specific model run and are used to activate model software facilities Database adjustment parameters control the growth of database money items Tax transfer parameters control the specific functioning of the tax and transfer programs The SPSM creates a set of output files that the user has specified Some of these outputs can be seen using the Visual SPSM interface Others contain microdata for further analysis using the SPSM or some other software package The SPSM can be run in two different ways Users can choose to use Visual SPSM to access the program This will be the method described in this guide as it does not require knowledge of the command interpreter environment Alternativel
74. s are to be displayed are given in a string parameter ASCVARS Each case that is output corresponds to the level of analysis given in another control parameter ASCUNIT The selection facility is generally used in conjunction with this facility since otherwise very large files could result The facility is especially useful for testing new scenarios For example if a number of households losing disposable income are noticed in a run that should only result in gainers the relevant information on an entire losing household can be printed out and examined A number of styles of output are supported An ASCSTYLE value of 1 produces a report designed to be easily human readable One household is output per page and one variable is output per line as shown below Text output facility style 1 lt page break gt hdseghh Household sequence number 61 idefseq Economic family sub sequence number 0 0 0 idcfseq Census family sub sequence number 0 0 0 hdprov DLOVUNDES a A a ta eee E wee 6 idage BAS a a BES a ar 28 24 0 idsex RS NA 0 1 1 idcfrh Relationship to census family head 0 al 2 immmkt arket income a Rae BYE Ai ea tn ae ee 27953 17350 0 immtran All transfer income 194 371 0 lt page break gt hdseghh Household sequence number 62 idefseq Economic family sub sequence number 0 0 0 idcfseq Census family sub sequence number 0 0 0 hdprov PrOVINCS 5 es a hig
75. s file is always written at the individual level of analysis and may contain any number of modeled variables TURNING POINT FACILITY The SPSM Turning Point Facility provides a means to analyze the points at which an individual household s marginal tax rate changes as its income increases The marginal tax rate is the proportion of tax that is paid on one additional dollar of income The turning points represent changes in the slope of the entire tax transfer function the marginal tax rate The facility computes the various income levels where an individual household given lts Characteristics would experience changes in its marginal tax rate and then outputs information on the current value of a number of variables at each of these levels of income The facility is useful for determining for example if a proposed means tested social assistance program will result in a disincentive to look for employment GOAL SEEKING FACILITY This tool is useful for answering what if type questions For example let s assume that you wish to get rid of the goods and services tax GST and replace the lost revenues by an increase in the income tax rates So what would the income tax rates have to be It would be possible to answer this question by first running a base case to observe the level of federal tax revenue obtained when the GST is collected and then set a variant case which sets the GST to zero The facility operates by iteratively executing a bl
76. simulation In our case the undeflated 2004 tax and transfer system In 2 you see the new name of the simulation In this case Example Welcome to the Statistics Canada Social Policy Simulation Database Model SPSD M Program Version 16 0 Database Adjustment Algorithm Standard Standard Tax Transfer Algorithm Version 16 0 91 12 Alternate Tax Transfer Algorithm none aucun Copyright c Minister of Industry 1984 2008 Press F1 for context specific help Press Ctrl Break to terminate Control Parameters 1 Enter name of input control parameter file gt spsd ba04 Loading control parameters from Quick cpr 2 Enter specification for generating output files gt Quick Generating default output file names The SPSM next displays some of the key content of the default control parameter file Introduction and Overview Guide Page 10 SPSD M Version 16 1 Current values of selected control parameters Descriptive CPRDESCE ax transfer 2004 Population 2004 Incomes 2004 2004S LICENSEE Statistics Canada SPSD M licensee Selection Sample SELFLAG 0 Selection facility activation flag SAMPLEREQ 1 000000000 Size of sample requested Input Databases INPSPD SSPSD v160y04 spd Name of SPSD file in INPFXV SSPSD v160y04 fxv Name of SHS vector file in INPWGT SSPSD v160y04 wgt Name of weight file in Growth INPAPR Quick
77. specific growth rates CPP QPP income is adjusted by differential rates according to age groups This allows a simulation of the phasing in of that program Users should refer to the Parameter Guide for further details on specific adjustment parameters Calculate Base Results and Variant Results Microsimulation results are usually analyzed by comparing the results of one specified scenario with those of another For example if one was interested in examining the impact of increasing the maximum amount of Old Age Security OAS in 2004 from 5592 75 to 6000 00 two scenarios would have to be calculated The first scenario would be the Introduction and Overview Guide Page 19 SPSD M Version 16 1 tax transfer system as currently legislated let us call it Scenario 1 The second scenario has the exact same tax transfer system with the exception that the maximum amount of Old Age Security is set to 6000 Let us call this second scenario Scenario 2 This could be done by performing two separate program runs and then comparing the outputs from the runs to determine the impact However the SPSM is capable of performing the comparison in a single program execution This is accomplished by applying the simulation algorithms to a given household twice in the same program run but with different parameter files One such application is called the base and produces base results while the second application is called the variant and produces variant re
78. stributional Analysis Facility 2 1 15 User defined control parameters if any _lUVARFLAG Activate UVAR parameter for expressions _lUVAR User statements Control Parameter Value Vv Control Parameter Value _imfcbene imfcbene imfcbene imfcbene units imfcbene spdiff gotvar S 0 gotvar M spdiff L Distribution of re c nkids imfcbene imfcbene gotvar L Average change ij EJ Ready ste Source File SPSD ba04 cpr Simulation Directory H Intro SPSM runs Simulation Ex1 Executable SPSM EXE Version 16 0 Open the two parameters using the edit box Tick on XTFLAG to produce tables and then enter the following in XTSPEC IN _imfcbene imfcbene imfcbene imfcbene units imfcbene gotvar L Average change in NCBS IN spdiff gotvar S 0 gotvar M spdiff L Distribution of recipients CF cfnkids imfcbene imfcbene gotvar L Average change spsdrecs This will produce three user tables Each table request ends with a semi colon and each starts with a prefix indicating which family level is being tabulated So the first table is a table of individuals while the third is a census family table See the User s Guide or XTab User s Guide for more information about creating tables At this point save the simulation and run the model You can then open the three user tables We will go through them one by one Introduction and Overview Guide Page 45 SPSD M V
79. sults The first run Scenario 1 would be calculated using the base set of parameters while Scenario 2 would be calculated using the variant parameters The results of any single simulation scenario are derived by a series of functions which sequentially calculate certain taxes and cash transfers as required by the tax transfer system For example old age security benefits must be known before calculating net income The sequence of these functions is controlled by a program called the driver drv The following figure represents the standard algorithm driver Changes to the standard or alternate algorithm driver can be made in glass box mode The following figure shows the structure of the standard tax transfer algorithm driver in more detail PA TV eA Y El OAS FA Commodity Taxes Reporting Variables SPSD Adjust Database Calculate Base Scenario Calculate Variant Scenario Calculate User Variables Selection and Output Routines Tax Transfer Algorithm Driver Structure The first three functions simulate the Employment Insurance Old Age Security and Family Introduction and Overview Guide Page 20 SPSD M Version 16 1 Allowance programs whose benefits are determined by factors outside the tax system This is followed by the calculation of net income The Guaranteed Income Supplement Spouses Allowances and social assistance are calculated next based on net income Fe
80. t is UVARFLAG which turns on the user variable facility Check the box so that user variables are created __lU ARFLAG Activate UYAR parameter for expressions 0 x Value Iv The second is UVAR This opens a blank box which can be edited The User s Guide gives you the syntax required to create user variables We want variables which will represent the distribution of the difference between the base and the variant amounts of NCBS as well as variables indicating whether a person received any NCBS at all The first step is to find out the name of the variable of interest the variable which contains the value of the NCBS Using the help file we find that the variable is called imfcbene To get the base amount for a variable you need to put an underscore before the name The following shows what ought to be entered in the UVAR box in order to create the user variables for this example diff imfcbene _imfcbene spdiff split diff 0 200 400 label spdiff Increase in benefits gotvar imfcbene gt 0 label gotvar Received variant benefits Three variables have been created and we have labeled each diff is the difference between the variant benefits and the base benefits spdiff uses the split function to create a Introduction and Overview Guide Page 44 SPSD M Version 16 1 classification variable which splits the difference between the variant and the base benefits split into four groups Min 0 1
81. to the right of the semi colon would tabulate total income accruing to census families the numbers of such families and the average income per census family all broken out by tenure categories rented owned with mortgage etc as the columns DISTRIBUTIONAL ANALYSIS FACILITY The distributional analysis facility calculates a set of univariate distributional statistics for a Introduction and Overview Guide Page 33 SPSD M Version 16 1 sample of SPSD cases If the distributional facility is activated a user specified random sample of up to 200 000 cases is stored and sorted in memory and distributional statistics are calculated on this sample The statistics provide the following information Number of zero and non zero observations Descriptive Statistics sum of weights sums sum of squares weighted mean Extreme values bottom five values and top five values Selected quantiles quintiles quartiles etc Histogram plot The output from the distributional facility can be found under the Tables tab in Visual SPSM In addition all output from the distributional facility is written to the TBL file for the program run An example using the distributional facility is shown in tutorial session 3 The following is an example of output from the distributional facility that has been produced for the variable imccea Child Care Expenses Allowed It was created using a previous version of the SPSM SPSD M Database 10 00 Base Description
82. ully performed are termed analysis variables An example of an analysis variable is idiemp which records the employment income of an individual The distinction between class and analysis variables is an important one Certain of the SPSM facilities require that either a class variable or an analysis variable be specified in certain contexts Class variables can be converted into analysis variables or analysis variables to class variables using the SPSM s facilities to create user defined variables A further important distinction is database versus modeled variables Database variables as described above represent responses to survey or administrative reports and reside on disk in the SPSD file Modeled variables are those variables which are calculated during the actual simulation run and may also be subsequently stored in result files Because of the many different types of variables used by the SPSM extensive and strict naming conventions have been adopted For example all database variables stored at the individual level of analysis begin with the id prefix and all individual modeled variables begin with an im Further details on naming conventions can be found in the Users Guide SIMULATOR The simulator is the second basic phase of an SPSM program run Once the user has started the model and provided a complete set of parameters the simulator phase begins The simulator phase operates in five sequential steps Each of these steps is descr
83. useful for subsequent analysis of simulation results USING THIS GUIDE Certain portions of this guide should be read by everyone who will be using the SPSM for research purposes from junior programmers to senior analysts If you are unfamiliar with the SPSD M and never plan to use the program or analyze and interpret the results directly you can confine your reading to this introductory chapter The SPSD M is a complex static microsimulation model and must be understood thoroughly if one is to make correct inferences The computer program itself however is simple to use and results can be produced very quickly with it Overview of the SPSD M presents the fundamental concepts which must be understood prior to conducting any research with the model This includes a description of all the basic parts of the model and their relationships to one another By reading this the user will also become familiar with the specific terminology which is used throughout the documentation Introduction and Overview Guide Page 1 SPSD M Version 16 1 The section titled Software and Facilities describes the use and function of the SPSM user facilities These facilities allow users to modify parameters interactively screen or select records produce default and custom tables and distribution reports create new variables and conduct marginal tax rate analyses After reading through the above sections the user should proceed to the tutorial examples The exampl
84. viduals and families should include commodity and sales taxes especially as these types of taxes play a larger role in the overall tax system The tax transfer parameters supplied with the SPSD M support analyses which are concerned with both income and sales tax Disposable income is defined in the SPSD M as total income minus total federal and provincial income taxes It therefore represents the amount of income an individual or family has available for spending e g shelter food savings Consumable income on the other hand is defined as disposable income less commodity taxes embodied in household consumption As such it is not a post all tax concept because not all taxes are accounted for when determining consumable income For example municipal property taxes and provincial land transfer taxes are not included in the calculation The SPSD M built in tables and standard reporting facilities define gainers and losers in terms of consumable income If users wish to express their analyses in terms of disposable income two approaches are possible First the user can disable the calculation of commodity taxes and cause consumable income to be set equal to disposable income Alternatively the user can specify custom tables using the X tab facility which are defined in terms of disposable income SPSM FILES The SPSD M uses a great number of different types of files Database files and supplied parameter files are found in the spsd directory
85. x Transfer Update Fat Ready stc Source File SPSD ba04 cpr Simulation Directory H Intro SPSM runs Simulation Ex1 Executable SPSM EXE Version 16 0 This is all the parameters we need to change In this scenario we are going to use the built in tables so there are no other changes necessary Save the simulation in a new directory by clicking on File Save Simulation As Save the simulation as Ex1 cpr in an appropriately named directory Then run the simulation by clicking on File Execute Simulation The Log Window opens if there are errors If the simulation executed successfully you may still scan the Log Window as you did in the Quick Start examples by selecting View Log from the toolbar Close the window Click on the Tables tab Open Table 0 results by Census family If you scroll down you ll see that CTC Child Benefits are now 8 289 60 Since we didn t run a base scenario we can t compare the results But if you open up the simulation you ran in Quick Start which did a simulation for 2004 with no tax and transfer changes you will find that the benefit used to be worth 7 862 90 so the change amounted to 426 7 million in increased benefits You cannot though find out what was the average increase per family To do that you should create a base scenario and also create new tables and new user variables The next example will show you how to do that SESSION 2 BASE SCENARIO CUSTOM TABLES USER ANALYSIS VARIAB
86. y the classic method of using SPSM is still available See How to Run the SPSM for details on using the classic method This guide assumes that all new users will be using the visual interface Any SPSM program run consists of the following four basic steps 1 Invoke SPSM 2 Edit parameters 3 Simulation 4 Generate Outputs Brief descriptions of these steps are given below 1 To invoke the SPSM go to Start Programs SPSM 16 0 Visual SPSM This invokes the visual interface which will be used to edit parameters run the simulation and examine outputs 2 The parameters can be edited using Visual SPSM The parameters are divided into four groups control parameters database adjustment parameters variant tax and transfer parameters and base tax and transfer parameters Introduction and Overview Guide Page 7 SPSD M Version 16 1 3 Once parameters have been changed the simulation can be started During this phase the database is read records are screened and tax transfer calculations are made based on the specified parameter settings 4 When the simulation is complete SPSM generates the specified output files Though SPSM results are always written to files most output can also be displayed in the interface RUNNING THE SIMULATION We are now ready to try the first simulation The SPSM is now invoked by clicking on Start Programs SPSM 16 0 Visual SPSM You ll see a screen with information about Visual SPSM
87. y database adjustment parameters are modified from their Introduction and Overview Guide Page 25 SPSD M Version 16 1 initial values in the database adjustment parameter files during the user dialogue then a modified database adjustment file with file extension of apr will be generated The database adjustment parameters supplied with the full SPSD M are based on differences between SPSD per capita base year 2004 figures and per capita national accounts data for available years For years where projections must be made a simple extrapolation of the growth rate over the past two years is performed Users may provide their own estimates if they wish to supply alternate growth rates Tax Transfer Parameters The final set of parameters is for controlling the algorithms which simulate taxes paid to and cash transfers received from government Users provide values for the appropriate year of analysis or the particular tax transfer scenario of interest These parameters can switch entire programs on or off as well as specify benefit levels reduction rates turning points tax tables and so forth If for example a user wished to examine the impact of increasing the maximum Old Age Security benefit to 6000 he or she would change the value of BOAS OUTPUT FACILITY The SPSM writes all requested simulation results to output files There are three main purposes for which the SPSM generates outputs e To document parameter settings which pr
88. y taxes and benefits For example child tax credits depend on the presence of children and the amount of family income The SPSM processes households and reports results based on several different social units The SPSD is a hierarchical family file in which the family relationships among all the members of a household are known The phrase a level of analysis refers to one of five hierarchically arranged types of families The individual is the smallest and a household is the largest The SPSM five family levels of analysis are defined as follows Individual Single person or record on the SPSD Nuclear family A head spouse if present and never married children under the age of 18 sharing the same dwelling Census Family A head spouse if present and unmarried children under the age of 25 sharing the same dwelling Economic Family A group of individuals living together who are all related by blood marriage or adoption and share the same dwelling Household Any individuals or group of individuals who share the same dwelling Note that unattached individuals are considered to be special kinds of census and economic families in SPSD M This usage differs from most Statistics Canada publications The SPSD data are stored at either the individual or the household levels For example age and employment income are individual level variables while province and shelter expenditures are household level variables The data from the individual

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