Estimating government receipts and expenditure from Jersey households 4 th April 2019 Statistics Jersey
Estimating receipts and expenditure Introduction 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”). Statistics Jersey
Estimating receipts and expenditure General approach • Number of working adults in the household • Number of (school age) children in the household • Total household earned income Inputs • Income split (if more than one adult is working) • If the household is entitled to receive income support Modelled • For example: couple with one child & household income of £80,000 household • Government receipts Estimates • Government expenditure Statistics Jersey
Estimating receipts and expenditure Basis of estimates Two main approaches to producing estimates: Estimates Estimated directly from household Estimated using analysis from other characteristics and income sources Examples: Examples: • • Income tax allowances GST • • Social security contributions and Impôts • supplementation Income tax relief • Income support Statistics Jersey
Estimating receipts and expenditure Example of approach from other sources • HES survey conducted 2014/15 Household • Detailed information on expenditure Expenditure Data of Jersey households Individual household • Assumptions made as to GST paid estimates of GST paid based on classification of expenditure • Regression model approach to give Fitted model estimates across all households Statistics Jersey
Estimating receipts and expenditure Important caveats • 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. Statistics Jersey
Estimating receipts and expenditure Examples of estimates 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 Statistics Jersey
Estimating receipts and expenditure Estimates Statistics Jersey
Estimating receipts and expenditure Tax-balances Statistics Jersey
Estimating receipts and expenditure Tax-balances Statistics Jersey
Estimating receipts and expenditure Potential applications 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 Statistics Jersey
Estimating receipts and expenditure Overall tax / contribution rates 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 Statistics Jersey
Estimating receipts and expenditure Overall tax / contribution rates 30% 25% Example overall 20% contribution 15% rate: 10% Single adult 5% 0% Income Tax LTC SS Fund Health Fund GST Impôts Statistics Jersey
Estimating receipts and expenditure Overall tax / contribution rates Married couple, both Single adult working, two children Statistics Jersey
Estimating receipts and expenditure “Take-home” pay 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 Statistics Jersey
Estimating receipts and expenditure “Take-home” pay Using as an example: Includes • Earned income • Income support Less • Income tax • Social security employee contributions • Long-term care charge Married couple, 50/50 income split, no children, 5 year resident Statistics Jersey
Estimating receipts and expenditure Applying to model income distributions Work primarily focused Can be extended to look on looking at an at multiple households individual household in the aggregate Statistics Jersey
Estimating receipts and expenditure Applying to model income distributions Need an income distribution: Can use a model or can empirically derive Pareto distribution: Log-normal distribution: • • Full-time workers More suited for general population models • Minimum salary level Statistics Jersey
Estimating receipts and expenditure Example full-time worker models Minimum earnings = £15,000 Mean earnings = £21,000 (Alpha = 2.5) Minimum earnings = £18,000 Mean earnings = £27,000 (Alpha = 2.0) Statistics Jersey
Estimating receipts and expenditure Applying to model income distributions 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. Statistics Jersey
Estimating receipts and expenditure Questions Any Questions? Statistics Jersey
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