The Wisconsin Tax Model system

A simulation model is a device, generally a computer system, for predicting responses to actions in the real world; a simulation model operates by calculating the effect on given initial conditions which would follow from a set of processes which have been described to the computer. A microfile model is one which incorporates a large mass of sample data about individuals — usually households, persons, or business firms —directly into each simulation (in contrast, a macro-econometric model would employ a relatively small number of statistical averages, moments or correlations.) Empirical studies of taxation economics have relied increasingly on microfile simulation models; most noteworthy is Pechman and Okner's study of U.S. tax incidence[1]Microfile studies of tax incidence at the state level are being performed in Colorado and Wisconsin; the latter study employs the Wisconsin Tax Model, which is the subject of this paper.