Estimating government receipts and expenditure from Jersey - - PowerPoint PPT Presentation

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Estimating government receipts and expenditure from Jersey households

4th April 2019

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Introduction

Estimating receipts and expenditure

Aim: To provide estimates of the level of government receipts and expenditure to and from Jersey households.

• Receipts considered:
• Personal income tax
• Goods and Services Tax (GST)
• Impôts (excise duty)
• Expenditure considered:
• Health
• Education
• Income support
• An allowance for “other” States expenditure

Consideration also given in respect of receipts into ring-fenced funds and the application of the States annual contribution into the Social Security Fund (“supplementation”).

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General approach

Estimating receipts and expenditure

Inputs Estimates Modelled household

• Number of working adults in the household
• Number of (school age) children in the household
• Total household earned income
• Income split (if more than one adult is working)
• If the household is entitled to receive income support
• Government receipts
• Government expenditure
• For example: couple with one child & household income of £80,000

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Basis of estimates

Estimating receipts and expenditure

Estimated directly from household characteristics and income Estimated using analysis from other sources

Examples:

• Income tax allowances
• Social security contributions and

supplementation

• Income support

Examples:

• GST
• Impôts
• Income tax relief

Estimates

Two main approaches to producing estimates:

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Example of approach from other sources

Estimating receipts and expenditure

Household Expenditure Data

Individual household estimates of GST paid Fitted model

• HES survey conducted 2014/15
• Detailed information on expenditure
• f Jersey households
• Assumptions made as to GST paid

based on classification of expenditure

• Regression model approach to give

estimates across all households

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Important caveats

Estimating receipts and expenditure

• Estimates are for households that contain at least one adult working for an employer.
• Estimates represent broad averages across all households that fulfil the input criteria. Therefore will

not be representative of a household’s specific circumstances.

• Estimates are dependent on the specific assumptions used - these assumptions can be varied.
• Point in time analysis – based on 2018 rates, allowances etc.
• Should be considered a starting point for further analysis and policy discussion.

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Examples of estimates

Estimating receipts and expenditure

Primary outputs consist of a series of tables for example

• households. These tables provide estimates for:
• Household outflows / expenditure to government
• Estimated receipts (general revenue and funds)
• Estimated expenditure on households
• Overall tax-balance

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Estimates

Estimating receipts and expenditure

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Tax-balances

Estimating receipts and expenditure

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Tax-balances

Estimating receipts and expenditure

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Potential applications

Estimating receipts and expenditure

Outputs should be considered a starting point for further analysis and policy discussion. Can vary which elements included, which not and also changes in rates, assumptions etc. Some examples of potential applications:

• Overall tax / contribution rates
• Estimates of “take-home” pay
• Applying to model income distributions

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Overall tax / contribution rates

Estimating receipts and expenditure

Concept of total effective tax / contribution rate experienced by a household. Average rate at which a household’s earned income is subject to a tax / charge. This example includes:

• Personal income tax
• GST
• Impôts
• Social security and health insurance employee contributions
• LTC contributions

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Overall tax / contribution rates

Estimating receipts and expenditure

0% 5% 10% 15% 20% 25% 30% Income Tax LTC SS Fund Health Fund GST Impôts

Example overall contribution rate: Single adult

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Overall tax / contribution rates

Estimating receipts and expenditure

Single adult Married couple, both working, two children

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“Take-home” pay

Estimating receipts and expenditure

Using as an example: Includes

• Earned income
• Income support

Less

• Income tax
• Social security employee

contributions

• Long-term care charge

Single adult, 5 year resident

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“Take-home” pay

Estimating receipts and expenditure

Married couple, 50/50 income split, no children, 5 year resident Using as an example: Includes

• Earned income
• Income support

Less

• Income tax
• Social security employee

contributions

• Long-term care charge

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Applying to model income distributions

Estimating receipts and expenditure

Work primarily focused

• n looking at an

individual household Can be extended to look at multiple households in the aggregate

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Applying to model income distributions

Estimating receipts and expenditure

Pareto distribution:

• Full-time workers
• Minimum salary level

Log-normal distribution:

• More suited for general population models

Need an income distribution: Can use a model or can empirically derive

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Example full-time worker models

Estimating receipts and expenditure

Minimum earnings = £15,000 Mean earnings = £21,000 (Alpha = 2.5) Minimum earnings = £18,000 Mean earnings = £27,000 (Alpha = 2.0)

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Estimating receipts and expenditure

Final points

• Same caveats apply to distributions as to the individual household estimates
• Distributions shown are examples, different scenarios can be explored by varying the parameters of

the distribution in the same way as varying the assumptions for the household estimates

• Should be considered a starting point for further analysis and policy discussion.

Applying to model income distributions

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Questions

Estimating receipts and expenditure

Any Questions?