Tax Calculation on Regular Assets
ESPlanner allows various spending behaviors to be used when calculating smoothed consumption patterns under Monte Carlo. When the most conservative spending pattern is selected, i.e., no real returns earned on asset classes, the regular asset income is zero in constant dollars because you are essentially only earning the estimated inflation rate. Do the fedaeral and state tax calculations include a current tax liability for the nominal rate of return on real assets inasmuch as the tax law levies tax on nominal income, not just real income. How does the program deal with this issue generally to avoid understating pro forma tax liability and potentially overstating consumption capacity?
RSS
The tax calculations are all done in nominal terms, if you have nominal income (zero real interest is not the same thing as zero nominal interest), you have taxes (unless you fall into the no taxation limits) and we account for those in all cases.
Best,
Dick Munroe