# Exercise with two tax regimes

**URL:** <https://forum.dynare.org/t/exercise-with-two-tax-regimes/27753>\
**Category:** Occbin\
**Created:** [2 July 2025 08:48 UTC](https://forum.dynare.org/t/exercise-with-two-tax-regimes/27753 "2025-07-02T08:48:08Z")\
**Posts on this page:** 2\
**Page:** 1

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**Author:** ![Random.t](https://forum.dynare.org/letter_avatar_proxy/v4/letter/r/eada6e/32.png) [@Random.t](https://forum.dynare.org/u/Random.t)\
**Post date:** [2 July 2025 08:48 UTC](https://forum.dynare.org/t/exercise-with-two-tax-regimes/27753/1 "2025-07-02T08:48:09Z")

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Hi everybody,

I am struggling with the OccBin tool and I cannot understand why in my model the piecewise linear dynamic overlap with the linear one for the whole response to the shock;

it is a 2 sector nk model with pollution externality where the carbon tax is supposed to switch between 2 fiscal regimes (high tax vs low tax) according to an exogeneously given trigger.

I would really appreciate any insight, thank you  
[occbin\_buildup.mod](https://forum.dynare.org/uploads/short-url/g2LKB47JTHWkEYtmZNqP9D8Cpkn.mod) (7.8 KB)

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<div class="post-metadata">

**Author:** ![jpfeifer](https://forum.dynare.org/user_avatar/forum.dynare.org/jpfeifer/32/5044_2.png) [@jpfeifer](https://forum.dynare.org/u/jpfeifer)\
**Post date:** [4 July 2025 10:34 UTC](https://forum.dynare.org/t/exercise-with-two-tax-regimes/27753/2 "2025-07-04T10:34:12Z")

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How is

```auto
[name='fiscal regime', relax='switch']
tau=tau_low; %%if tau <= tau_trigger, tau=tau_low (relax);

[name='fiscal regime', bind='switch']
tau=tau_high; %%if tau > tau_trigger, tau=tau_high (bind);

```

supposed to work? You set `tau` to a fixed value that never changes. There is no movement at all in the variable that determines the switching.