Merge branch 'master' of https://github.com/PolicyEngine/policyengine-us

 into shuyu7zhan/issue4176

CHANGELOG.md

@@ -5,6 +5,24 @@ All notable changes to this project will be documented in this file.
 The format is based on [Keep a Changelog](https://keepachangelog.com/en/1.0.0/),
 and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0.html).
 
+## [0.715.0] - 2024-03-25 18:10:17
+
+### Added
+
+- Biden reform to tax LTCG and qualified dividends as ordinary income for high-income filers.
+
+## [0.714.0] - 2024-03-25 15:54:18
+
+### Fixed
+
+- Maryland earned income tax credit.
+
+## [0.713.3] - 2024-03-25 15:14:47
+
+### Fixed
+
+- Bug in filing status logic causing tax unit spouses to appear in separate returns.
+
 ## [0.713.2] - 2024-03-24 03:38:17
 
 ### Added
@@ -7974,6 +7992,9 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
 
 
 
+[0.715.0]: https://github.com/PolicyEngine/policyengine-us/compare/0.714.0...0.715.0
+[0.714.0]: https://github.com/PolicyEngine/policyengine-us/compare/0.713.3...0.714.0
+[0.713.3]: https://github.com/PolicyEngine/policyengine-us/compare/0.713.2...0.713.3
 [0.713.2]: https://github.com/PolicyEngine/policyengine-us/compare/0.713.1...0.713.2
 [0.713.1]: https://github.com/PolicyEngine/policyengine-us/compare/0.713.0...0.713.1
 [0.713.0]: https://github.com/PolicyEngine/policyengine-us/compare/0.712.0...0.713.0

changelog.yaml

@@ -6803,3 +6803,19 @@
     added:
     - Longer history and source for Social Security benefits target.
   date: 2024-03-24 03:38:17
+- bump: patch
+  changes:
+    fixed:
+    - Bug in filing status logic causing tax unit spouses to appear in separate returns.
+  date: 2024-03-25 15:14:47
+- bump: minor
+  changes:
+    fixed:
+    - Maryland earned income tax credit.
+  date: 2024-03-25 15:54:18
+- bump: minor
+  changes:
+    added:
+    - Biden reform to tax LTCG and qualified dividends as ordinary income for high-income
+      filers.
+  date: 2024-03-25 18:10:17

policyengine_us/parameters/gov/contrib/biden/budget_2025/capital_gains/README.md

@@ -0,0 +1 @@
+# Tax capital gains income as ordinary income

policyengine_us/parameters/gov/contrib/biden/budget_2025/capital_gains/active.yaml

@@ -0,0 +1,11 @@
+description: The proposal of President Biden to tax capital income as ordinary is active if this is true.
+metadata:
+  unit: bool
+  period: year
+  label: Capital income over threshold taxed as ordinary income
+  reference:
+    - title: General Explanations of the Administration's Fiscal Year 2025 Revenue Proposals
+      href: https://home.treasury.gov/system/files/131/General-Explanations-FY2025.pdf#page=88
+
+values:
+  0000-01-01: false

policyengine_us/parameters/gov/contrib/biden/budget_2025/capital_gains/income_threshold.yaml

@@ -0,0 +1,22 @@
+description: President Biden proposed taxing as ordinary income the excess of capital income above these thresholds, by filing status.
+metadata:
+  reference:
+    - title: General Explanations of the Administration's Fiscal Year 2025 Revenue Proposals
+      href: https://home.treasury.gov/system/files/131/General-Explanations-FY2025.pdf#page=88
+  label: Threshold above which capital income is taxed as ordinary income  
+  unit: currency-USD
+  period: year
+  uprating: gov.irs.uprating
+
+  breakdown:
+    - filing_status
+JOINT:
+  2024-01-01: 1_000_000 
+SINGLE:
+  2024-01-01: 1_000_000 
+SEPARATE:
+  2024-01-01: 500_000 
+HEAD_OF_HOUSEHOLD:
+  2024-01-01: 1_000_000 
+WIDOW:
+  2024-01-01: 1_000_000 

policyengine_us/parameters/gov/states/md/tax/income/credits/eitc/match/non_refundable.yaml → policyengine_us/parameters/gov/states/md/tax/income/credits/eitc/non_refundable/married_or_has_child/match.yaml

@@ -1,4 +1,4 @@
-description: Maryland matches this percent of the federal Earned Income Tax Credit as a non-refundable credit for filers who are not single and childless.
+description: Maryland matches this percent of the federal Earned Income Tax Credit for individuals with qualifying child or married couples filing jointly or separately with or without a qualifying child.
 values:
   2019-01-01: 0.5
 metadata:
@@ -7,3 +7,6 @@ metadata:
   reference:
     - title: Md. Code, Tax-Gen. § 10-704(c)(1)(i)
       href: https://casetext.com/statute/code-of-maryland/article-tax-general/title-10-income-tax/subtitle-7-income-tax-credits/section-10-704-effective-until-6302023-for-earned-income
+    - title: 2021 Maryland Resident Booklet Individual
+      href: https://www.marylandtaxes.gov/forms/21_forms/Resident_Booklet.pdf#page=19
+      #  you may claim one-half (50%) of the federal credit on your Maryland return.

policyengine_us/parameters/gov/states/md/tax/income/credits/eitc/non_refundable/unmarried_childless/match.yaml

@@ -0,0 +1,14 @@
+description: Maryland matches this percentage of the federal Earned Income Tax Credit to individuals without a qualifying child. 
+values:
+  2019-01-01: 1
+metadata:
+  unit: /1
+  period: year
+  label: Maryland childless EITC match
+  reference:
+    - title: Md. Code, Tax-Gen. § 10-704(c)(3)(ii)
+      href: https://casetext.com/statute/code-of-maryland/article-tax-general/title-10-income-tax/subtitle-7-income-tax-credits/section-10-704-effective-until-6302023-for-earned-income
+    - title: 2021 Maryland Resident Booklet Individual
+      href: https://www.marylandtaxes.gov/forms/21_forms/Resident_Booklet.pdf#page=19
+      # Individuals filing as single, head of household, or qualifying widow(er) without a qualifying child 
+      # may claim 100% of the federal earned income credit

policyengine_us/parameters/gov/states/md/tax/income/credits/eitc/childless/max_amount.yaml → policyengine_us/parameters/gov/states/md/tax/income/credits/eitc/non_refundable/unmarried_childless/max_amount.yaml

@@ -1,4 +1,4 @@
-description: Maryland provides up to this amount for its Earned Income Tax Credit to single childless filers.
+description: Maryland provides up to this amount for its Earned Income Tax Credit to individuals without a qualifying child. 
 values:
   2019-01-01: 530
   2023-01-01: .inf
@@ -9,5 +9,8 @@ metadata:
   reference:
     - title: Md. Code, Tax-Gen. § 10-704(c)(3)(iii)
       href: https://casetext.com/statute/code-of-maryland/article-tax-general/title-10-income-tax/subtitle-7-income-tax-credits/section-10-704-effective-until-6302023-for-earned-income
+      # Individuals filing as single, head of household, or qualifying widow(er) without a qualifying child
+    - title: 2021 Maryland Resident Booklet Individual
+      href: https://www.marylandtaxes.gov/forms/21_forms/Resident_Booklet.pdf#page=19
     - title: Family Prosperity Act of 2023
       href: https://mgaleg.maryland.gov/2023RS/fnotes/bil_0007/hb0547.pdf

policyengine_us/parameters/gov/states/md/tax/income/credits/non_refundable.yaml

@@ -2,10 +2,10 @@ description: Maryland list of non-refundable tax credits.
 values:
   2020-01-01:
     - md_cdcc
-    - md_non_single_childless_non_refundable_eitc
+    - md_non_refundable_eitc
     - md_poverty_line_credit
   2022-01-01:
     - md_cdcc
-    - md_non_single_childless_non_refundable_eitc
+    - md_non_refundable_eitc
     - md_poverty_line_credit
     - md_senior_tax_credit

policyengine_us/parameters/gov/states/md/tax/income/credits/refundable.yaml

@@ -2,6 +2,5 @@ description: Maryland list of refundable tax credits.
 values:
   2020-01-01:
     - md_refundable_cdcc
-    - md_non_single_childless_refundable_eitc
-    - md_single_childless_eitc
+    - md_refundable_eitc
     - md_ctc

policyengine_us/reforms/biden/budget_2025/__init__.py

@@ -1,3 +1,7 @@
 from .medicare_and_investment_tax_increase import (
     create_medicare_and_investment_tax_increase_reform,
 )
+
+from .capital_gains_tax_increase import (
+    create_capital_gains_tax_increase_reform,
+)

policyengine_us/reforms/biden/budget_2025/capital_gains_tax_increase.py

@@ -0,0 +1,157 @@
+from policyengine_us.model_api import *
+
+
+def create_capital_gains_tax_increase() -> Reform:
+    class capital_gains_tax(Variable):
+        value_type = float
+        entity = TaxUnit
+        label = "Maximum income tax after capital gains tax"
+        unit = USD
+        definition_period = YEAR
+
+        def formula(tax_unit, period, parameters):
+            net_cg = tax_unit("net_capital_gain", period)
+            taxable_income = tax_unit("taxable_income", period)
+            adjusted_net_cg = min_(
+                tax_unit("adjusted_net_capital_gain", period),
+                taxable_income,
+            )  # ANCG is referred to in all cases as ANCG or taxable income if less.
+
+            cg = parameters(period).gov.irs.capital_gains
+
+            excluded_cg = tax_unit(
+                "capital_gains_excluded_from_taxable_income", period
+            )
+            non_cg_taxable_income = max_(0, taxable_income - excluded_cg)
+            income_less_ancg = max_(0, taxable_income - adjusted_net_cg)
+
+            filing_status = tax_unit("filing_status", period)
+
+            first_threshold = cg.brackets.thresholds["1"][filing_status]
+            second_threshold = cg.brackets.thresholds["2"][filing_status]
+
+            income_ordinarily_under_second_rate = clip(
+                taxable_income, 0, first_threshold
+            )
+
+            income_ordinarily_under_third_rate = clip(
+                taxable_income, 0, second_threshold
+            )
+
+            # The 2025 Biden Budget taxes the excess of long-term capital gains and qualified dividends
+            # over $1 million as ordinary income.
+            # We apply this only to ANCG, not Unrecaptured Section 1250 Gain or the 28% rate CG.
+
+            p_reform = parameters(
+                period
+            ).gov.contrib.biden.budget_2025.capital_gains
+            income_threshold = p_reform.income_threshold[filing_status]
+            excess_income = max_(0, taxable_income - income_threshold)
+
+            cg_in_top_bracket = min_(adjusted_net_cg, excess_income)
+
+            income_tax = parameters(period).gov.irs.income.bracket.rates["7"]
+
+            new_cg_tax = cg_in_top_bracket * income_tax
+
+            cg_in_first_bracket = max_(
+                0, income_ordinarily_under_second_rate - income_less_ancg
+            )
+
+            cg_in_first_bracket_below_top_bracket = max_(
+                cg_in_first_bracket - cg_in_top_bracket, 0
+            )
+
+            cg_in_second_bracket = min_(
+                max_(
+                    0, adjusted_net_cg - cg_in_first_bracket_below_top_bracket
+                ),
+                max_(
+                    0,
+                    income_ordinarily_under_third_rate
+                    - (
+                        non_cg_taxable_income
+                        + cg_in_first_bracket_below_top_bracket
+                    ),
+                ),
+            )
+
+            cg_in_second_bracket_below_top_bracket = max_(
+                cg_in_second_bracket - cg_in_top_bracket, 0
+            )
+
+            cg_in_third_bracket = max_(
+                adjusted_net_cg
+                - cg_in_first_bracket_below_top_bracket
+                - cg_in_second_bracket_below_top_bracket,
+                0,
+            )
+
+            cg_in_third_bracket_below_top_bracket = max_(
+                cg_in_third_bracket - cg_in_top_bracket, 0
+            )
+
+            main_cg_tax = (
+                cg_in_first_bracket_below_top_bracket * cg.brackets.rates["1"]
+                + cg_in_second_bracket_below_top_bracket
+                * cg.brackets.rates["2"]
+                + cg_in_third_bracket_below_top_bracket
+                * cg.brackets.rates["3"]
+                + new_cg_tax
+            )
+
+            unrecaptured_s_1250_gain = tax_unit(
+                "unrecaptured_section_1250_gain", period
+            )
+
+            qualified_dividends = add(
+                tax_unit, period, ["qualified_dividend_income"]
+            )
+
+            max_taxable_unrecaptured_gain = min_(
+                unrecaptured_s_1250_gain,
+                max_(0, net_cg - qualified_dividends),
+            )
+            unrecaptured_gain_deduction = max_(
+                non_cg_taxable_income + net_cg - taxable_income,
+                0,
+            )
+            taxable_unrecaptured_gain = max_(
+                max_taxable_unrecaptured_gain - unrecaptured_gain_deduction,
+                0,
+            )
+
+            unrecaptured_gain_tax = (
+                cg.unrecaptured_s_1250_rate * taxable_unrecaptured_gain
+            )
+
+            remaining_cg_tax = (
+                tax_unit("capital_gains_28_percent_rate_gain", period)
+                * cg.other_cg_rate
+            )
+            return main_cg_tax + unrecaptured_gain_tax + remaining_cg_tax
+
+    class reform(Reform):
+        def apply(self):
+            self.update_variable(capital_gains_tax)
+
+    return reform
+
+
+def create_capital_gains_tax_increase_reform(
+    parameters, period, bypass: bool = False
+):
+    if bypass:
+        return create_capital_gains_tax_increase()
+
+    p = parameters(period).gov.contrib.biden.budget_2025.capital_gains
+
+    if p.active:
+        return create_capital_gains_tax_increase()
+    else:
+        return None
+
+
+capital_gains_tax_increase = create_capital_gains_tax_increase_reform(
+    None, None, bypass=True
+)

policyengine_us/reforms/reforms.py

@@ -17,6 +17,7 @@
 from .biden.budget_2025 import (
     create_medicare_and_investment_tax_increase_reform,
 )
+from .biden.budget_2025 import create_capital_gains_tax_increase_reform
 from policyengine_core.reforms import Reform
 import warnings
 
@@ -50,6 +51,9 @@ def create_structural_reforms_from_parameters(parameters, period):
     reported_state_income_tax = create_reported_state_income_tax_reform(
         parameters, period
     )
+    capital_gains_tax_increase = create_capital_gains_tax_increase_reform(
+        parameters, period
+    )
 
     reforms = [
         afa_reform,
@@ -63,6 +67,7 @@ def create_structural_reforms_from_parameters(parameters, period):
         abolish_payroll_tax,
         reported_state_income_tax,
         medicare_and_investment_tax_increase,
+        capital_gains_tax_increase,
     ]
     reforms = tuple(filter(lambda x: x is not None, reforms))