The basic data source for this analysis is the 1994 Consumer Expenditure Survey (CES). The CES has detailed household level data on consumption patterns as well as some data on household income, taxes and household demographic characteristics. There are 3 adjustments I must make to the CES data before I can analyze any tax reform. First, the CES reports out of pocket medical expenditures and ignores spending on a consumer’s behalf by HMOs and insurance companies. I use data from the National Medical Expenditure Survey (NMES) to attribute medical spending to individual households to replace the health spending reported in the CES. Second, I make adjustments to the CES income and consumption categories to match aggregate numbers in the National Income and Product Accounts. Third, I attribute corporate tax payments to individual households using a methodology developed by Feldstein (1988). I provide details on these adjustments in Appendix A.

Most of the environmental taxes that I will consider are applied to industries in production. Attributing these taxes to consumer goods is a somewhat more complicated process.

I use the 1992 Benchmark Input Output Accounts to follow the flow of price increases arising from taxation of intermediate goods through to consumer price increases. I describe the use of this data set in Appendix B.