Merge pull request #61 from taxpat/salt

Merging
TheCGO · Oct 13, 2023 · 66c48e7 · 66c48e7
2 parents 4a96442 + fea2bdb
commit 66c48e7
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diff --git a/CHANGELOG.md b/CHANGELOG.md
@@ -5,6 +5,13 @@ 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).
 
+## [0.2.3] - 2023-10-13 16:00:00
+
+### Added
+
+- added three files `prior_year_state_income_tax_paid.py`, `prior_year_local_income_tax_paid.py`, and `sales_or_prior_year_state_and_local_income_tax.py`
+- adjusted `salt_deduction.py` to calculate based on the added variables above
+
 ## [0.2.2] - 2023-10-13 03:30:00
 
 ### Added
@@ -164,6 +171,7 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
 - First prototype version based off of openfisca-us and tax-calculator.
 
 
+[0.2.3]: https://github.com/TheCGO/fiscalsim-us/compare/v0.2.2...v0.2.3
 [0.2.2]: https://github.com/TheCGO/fiscalsim-us/compare/v0.2.1...v0.2.2
 [0.2.1]: https://github.com/TheCGO/fiscalsim-us/compare/v0.2.0...v0.2.1
 [0.2.0]: https://github.com/TheCGO/fiscalsim-us/compare/v0.1.5...v0.2.0

diff --git a/changelog.yaml b/changelog.yaml
@@ -151,3 +151,9 @@
     added:
       - Updates files from PolicyEngine-US v0.500.0 (e4a95733baafca0a7bec9ae79e96797416a4d237)
   date: 2023-10-13 03:30:00
+- bump: patch
+  changes:
+    added:
+      - adjusted `salt_deduction.py` to calculate based on the added variables
+      - Adds three files `prior_year_state_income_tax_paid.py`, `prior_year_local_income_tax_paid.py`, and `sales_or_prior_year_state_and_local_income_tax.py`
+  date: 2023-10-13 16:00:00
diff --git a/fiscalsim_us/parameters/gov/irs/deductions/deductions_if_not_itemizing.yaml b/fiscalsim_us/parameters/gov/irs/deductions/deductions_if_not_itemizing.yaml
@@ -5,5 +5,5 @@ values:
     - qualified_business_income_deduction
 metadata:
   unit: variable
-  name: taxable_income_deductions_if_itemizing
-  label: Taxable income deductions if itemizing
+  name: taxable_income_deductions_if_not_itemizing
+  label: Taxable income deductions if not itemizing
diff --git a/fiscalsim_us/tests/policy/baseline/gov/irs/integration/us_itemize.yaml b/fiscalsim_us/tests/policy/baseline/gov/irs/integration/us_itemize.yaml
@@ -52,6 +52,6 @@
     state_income_tax: 4_576.44
     adjusted_gross_income: 100_000
     taxable_income_deductions_if_not_itemizing: 12_550
-    taxable_income_deductions_if_itemizing: 8_000 + 10_000
+    taxable_income_deductions_if_itemizing: 8_000 + 6_000
     tax_unit_itemizes: true
-    taxable_income: 100_000 - 18_000
+    taxable_income: 100_000 - 14_000
diff --git a/...alsim_us/tests/policy/baseline/gov/states/ia/tax/income/ia_itemized_deductions_indiv.yaml b/...alsim_us/tests/policy/baseline/gov/states/ia/tax/income/ia_itemized_deductions_indiv.yaml
@@ -14,7 +14,7 @@
       tax_unit:
         members: [person1, person2]
         interest_deduction: 17_000
-        state_and_local_sales_or_income_tax: 8_000
+        statelocal_sales_or_prior_inctax: 8_000
     households:
       household:
         members: [person1, person2]

diff --git a/...alsim_us/tests/policy/baseline/gov/states/ia/tax/income/ia_itemized_deductions_joint.yaml b/...alsim_us/tests/policy/baseline/gov/states/ia/tax/income/ia_itemized_deductions_joint.yaml
@@ -14,7 +14,7 @@
       tax_unit:
         members: [person1, person2]
         interest_deduction: 17_000
-        state_and_local_sales_or_income_tax: 8_000
+        statelocal_sales_or_prior_inctax: 8_000
     households:
       household:
         members: [person1, person2]

diff --git a/fiscalsim_us/tests/policy/baseline/gov/states/ia/tax/income/ia_itemized_deductions_unit.yaml b/fiscalsim_us/tests/policy/baseline/gov/states/ia/tax/income/ia_itemized_deductions_unit.yaml
@@ -14,7 +14,7 @@
       tax_unit:
         members: [person1, person2]
         interest_deduction: 17_000
-        state_and_local_sales_or_income_tax: 8_000
+        statelocal_sales_or_prior_inctax: 8_000
     households:
       household:
         members: [person1, person2]

diff --git a/..._us/tests/policy/baseline/gov/states/nm/tax/income/deductions/nm_itemized_deductions.yaml b/..._us/tests/policy/baseline/gov/states/nm/tax/income/deductions/nm_itemized_deductions.yaml
@@ -4,7 +4,7 @@
   input:
     filing_status: SINGLE
     tax_unit_itemizes: True
-    state_and_local_sales_or_income_tax: 5_000
+    statelocal_sales_or_prior_inctax: 5_000
     real_estate_taxes: 7_500
     standard_deduction: 5_000
     state_code: NM
@@ -17,7 +17,7 @@
   input:
     filing_status: SINGLE
     tax_unit_itemizes: True
-    state_and_local_sales_or_income_tax: 5_000
+    statelocal_sales_or_prior_inctax: 5_000
     real_estate_taxes: 0
     standard_deduction: 2_000
     state_code: NM
@@ -30,7 +30,7 @@
   input:
     filing_status: SEPARATE
     tax_unit_itemizes: True
-    state_and_local_sales_or_income_tax: 7_500
+    statelocal_sales_or_prior_inctax: 7_500
     real_estate_taxes: 0
     standard_deduction: 2_000
     state_code: NM
@@ -43,7 +43,7 @@
   input:
     filing_status: SINGLE
     tax_unit_itemizes: True
-    state_and_local_sales_or_income_tax: 0
+    statelocal_sales_or_prior_inctax: 0
     real_estate_taxes: 0
     standard_deduction: 2_000
     state_code: NM
@@ -56,7 +56,7 @@
   input:
     filing_status: SINGLE
     tax_unit_itemizes: False
-    state_and_local_sales_or_income_tax: 7_500
+    statelocal_sales_or_prior_inctax: 7_500
     real_estate_taxes: 0
     standard_deduction: 2_000
     state_code: NM

diff --git a/fiscalsim_us/tests/policy/baseline/gov/states/sc/tax/income/sc_state_tax_addback.yaml b/fiscalsim_us/tests/policy/baseline/gov/states/sc/tax/income/sc_state_tax_addback.yaml
@@ -9,14 +9,14 @@
     casualty_loss_deduction: 0
     standard_deduction: 4_000
     real_estate_taxes: 3_000
-    state_and_local_sales_or_income_tax: 1_000
+    statelocal_sales_or_prior_inctax: 1_000
     state_code: SC
   output:
     sc_state_tax_addback: 1_000
     # line 3 = 2000 - 0 = 2000
     # line 4 = 1000
     # line 5 = 5000 - 3000 = 2000
-  
+
 - name: Test case 2 #salt has a cap of 10000 for JOINT
   period: 2021
   input:
@@ -28,11 +28,11 @@
     casualty_loss_deduction: 0
     standard_deduction: 4_000
     real_estate_taxes: 3_000
-    state_and_local_sales_or_income_tax: 1_000
+    statelocal_sales_or_prior_inctax: 1_000
     state_code: SC
   output:
     sc_state_tax_addback: 0
-    # line 3 = 2000 - 4000 = 0 
+    # line 3 = 2000 - 4000 = 0
     # line 4 = 1000
     # line 5 = 10000 - 3000 = 7000
 
@@ -47,14 +47,14 @@
     casualty_loss_deduction: 0
     standard_deduction: 1_000
     real_estate_taxes: 8_000
-    state_and_local_sales_or_income_tax: 6_000
+    statelocal_sales_or_prior_inctax: 6_000
     state_code: SC
   output:
     sc_state_tax_addback: 2_000
-    # line 3 = 4000 - 1000 = 3000 
+    # line 3 = 4000 - 1000 = 3000
     # line 4 = 6000
     # line 5 = 10000 - 8000 = 2000
-    
+
 - name: Test case 4 #salt has a cap of 10000 for JOINT
   period: 2021
   input:
@@ -66,11 +66,11 @@
     casualty_loss_deduction: 0
     standard_deduction: 4_000
     real_estate_taxes: 3_000
-    state_and_local_sales_or_income_tax: 1_000
+    statelocal_sales_or_prior_inctax: 1_000
     state_code: SC
   output:
     sc_state_tax_addback: 0
-    # line 3 = 2000 - 4000 = 0 
+    # line 3 = 2000 - 4000 = 0
     # line 4 = 1000
     # line 5 = 10000 - 3000 = 7000
 
@@ -85,7 +85,7 @@
     casualty_loss_deduction: 0
     standard_deduction: 1_000
     real_estate_taxes: 8_000
-    state_and_local_sales_or_income_tax: 6_000
+    statelocal_sales_or_prior_inctax: 6_000
     state_code: SC
   output:
     sc_state_tax_addback: 0

diff --git a/fiscalsim_us/variables/gov/irs/README.md b/fiscalsim_us/variables/gov/irs/README.md
@@ -0,0 +1,9 @@
+# IRS
+
+## State and local tax (SALT) Deduction
+
+The SALT deduction previously created a circularity with some states' tax logic because itemizing federal filers can deduct current-year prepayments of state and local income tax liability (if greater than state and local sales tax liability) in the state and local tax deduction on the federal form. However, that current state and local income tax liability is simultaneously calculated and in some states requires the value of federal taxable income, which includes (subtracts) the SALT deduction. This creates a circularity in the tax logic that FiscalSim-US is not able to handle at this point.
+
+To be clear, the tax logic correctly includes this circularity. However, our solution is to write the code in the way that most filers use the SALT deduction, excluding the case in which filers deduct current-year state and local income tax liability. We created two new variables--`prior_year_state_income_tax_paid` and `prior_year_local_income_tax_paid`--and used those variables in the calculation of `statelocal_sales_or_prior_inctax`, which in turn goes into the `salt_deduction` variable calculation. In other words, the SALT deduction calculation in FiscalSim-US only allows for deducting prior year state and local income taxes.
+
+There is a workaround for capturing the effect of those who include their current-year paid state and local income taxes in their SALT deduction. Because the variables `prior_year_state_income_tax_paid` and `prior_year_local_income_tax_paid` are just household tax unit variables, a user can just increase those amounts to whatever level of total state and local income taxes paid go into the SALT deduction calculation.
diff --git a/fiscalsim_us/variables/gov/irs/income/taxable_income/deductions/itemizing/salt_deduction.py b/fiscalsim_us/variables/gov/irs/income/taxable_income/deductions/itemizing/salt_deduction.py
@@ -6,15 +6,18 @@ class salt_deduction(Variable):
     entity = TaxUnit
     label = "SALT deduction"
     unit = USD
-    documentation = "State and local taxes plus real estate tax deduction from taxable income."
+    documentation = "State and local taxes paid plus real estate tax deduction from taxable income."
     definition_period = YEAR
     reference = "https://www.law.cornell.edu/uscode/text/26/164"
 
     def formula(tax_unit, period, parameters):
         salt_amount = add(
             tax_unit,
             period,
-            ["state_and_local_sales_or_income_tax", "real_estate_taxes"],
+            [
+                "statelocal_sales_or_prior_inctax",
+                "real_estate_taxes",
+            ],
         )
         salt = parameters(
             period

diff --git a/...m_us/variables/gov/irs/taxcalc/deductions/itemized/state_and_local_sales_or_income_tax.py b/...m_us/variables/gov/irs/taxcalc/deductions/itemized/state_and_local_sales_or_income_tax.py
diff --git a/fiscalsim_us/variables/gov/states/nm/tax/income/deductions/nm_itemized_deductions.py b/fiscalsim_us/variables/gov/states/nm/tax/income/deductions/nm_itemized_deductions.py
@@ -21,7 +21,7 @@ def formula(tax_unit, period, parameters):
 
         # tax/income, federal Schedule A, line 5a. 1
         salt_sales_or_income = tax_unit(
-            "state_and_local_sales_or_income_tax", period
+            "statelocal_sales_or_prior_inctax", period
         )
         # state_and_local_tax, line 5d. 2
         total_salt = (

diff --git a/fiscalsim_us/variables/gov/states/sc/tax/income/sc_state_tax_addback.py b/fiscalsim_us/variables/gov/states/sc/tax/income/sc_state_tax_addback.py
@@ -36,7 +36,7 @@ def formula(tax_unit, period, parameters):
             0, federal_itemized_deduction - federal_standard_deduction
         )
         # line 4
-        salt = tax_unit("state_and_local_sales_or_income_tax", period)
+        salt = tax_unit("statelocal_sales_or_prior_inctax", period)
         # line 5
         real_estate_and_property_taxes = add(
             tax_unit, period, ["real_estate_taxes"]

diff --git a/fiscalsim_us/variables/gov/states/tax/income/state_income_tax.py b/fiscalsim_us/variables/gov/states/tax/income/state_income_tax.py
@@ -11,32 +11,32 @@ class state_income_tax(Variable):
         # state income tax variables listed in alphabetical order:
         "ca_income_tax",
         # "co_income_tax",  --- activating will cause circular logic errors
-        # "dc_income_tax",  --- activating will cause circular logic errors
-        # "ia_income_tax",  --- activating will cause circular logic errors
+        "dc_income_tax",
+        "ia_income_tax",
         "il_income_tax",
         "in_income_tax",
         "ks_income_tax",
         "ky_income_tax",
-        # "la_income_tax",  --- activating will cause circular logic errors
-        # "ma_income_tax",  --- activating will cause circular logic errors
-        # "md_income_tax",  --- activating will cause circular logic errors
-        # "me_income_tax",  --- activating will cause circular logic errors
+        "la_income_tax",
+        "ma_income_tax",
+        "md_income_tax",
+        "me_income_tax",
         "mn_income_tax",
         "mt_income_tax",
         # "mo_income_tax",  --- activating will cause circular logic errors
         "nc_income_tax",
-        # "nd_income_tax",  --- activating will cause circular logic errors
-        # "ne_income_tax",  --- activating will cause circular logic errors
+        "nd_income_tax",
+        "ne_income_tax",
         "nh_income_tax",
         "nj_income_tax",
-        # "nm_income_tax",  --- activating will cause circular logic errors
-        # "ny_income_tax",  --- activating will cause circular logic errors
-        # "ok_income_tax",  --- activating will cause circular logic errors
-        # "or_income_tax",  --- activating will cause circular logic errors
+        "nm_income_tax",
+        "ny_income_tax",
+        "ok_income_tax",
+        "or_income_tax",
         "pa_income_tax",
         "ri_income_tax",
         # "va_income_tax",  --- temporarily deactivated until change if to where
-        # "ut_income_tax",  --- temporarily deactivated until change if to where
+        "ut_income_tax",
         "wa_income_tax",
         "wi_income_tax",
     ]

diff --git a/fiscalsim_us/variables/household/income/tax_unit/prior_year_local_income_tax_paid.py b/fiscalsim_us/variables/household/income/tax_unit/prior_year_local_income_tax_paid.py
@@ -0,0 +1,9 @@
+from fiscalsim_us.model_api import *
+
+
+class prior_year_local_income_tax_paid(Variable):
+    value_type = float
+    entity = Person
+    label = "Prior year local income taxes paid"
+    unit = USD
+    definition_period = YEAR
diff --git a/fiscalsim_us/variables/household/income/tax_unit/prior_year_state_income_tax_paid.py b/fiscalsim_us/variables/household/income/tax_unit/prior_year_state_income_tax_paid.py
@@ -0,0 +1,9 @@
+from fiscalsim_us.model_api import *
+
+
+class prior_year_state_income_tax_paid(Variable):
+    value_type = float
+    entity = Person
+    label = "Prior year state income taxes paid"
+    unit = USD
+    definition_period = YEAR
diff --git a/fiscalsim_us/variables/household/income/tax_unit/statelocal_sales_or_prior_inctax.py b/fiscalsim_us/variables/household/income/tax_unit/statelocal_sales_or_prior_inctax.py
@@ -0,0 +1,24 @@
+from fiscalsim_us.model_api import *
+
+
+class statelocal_sales_or_prior_inctax(Variable):
+    value_type = float
+    entity = TaxUnit
+    definition_period = YEAR
+    label = "Prior year state and local income taxes paid or state and local sales taxes paid"
+    unit = USD
+
+    def formula(tax_unit, period, parameters):
+        # Only sales or income tax can be itemized, but not both.
+        prior_year_statelocal_inctax = add(
+            tax_unit,
+            period,
+            [
+                "prior_year_state_income_tax_paid",
+                "prior_year_local_income_tax_paid",
+            ],
+        )
+        sales_tax = add(
+            tax_unit, period, ["state_sales_tax", "local_sales_tax"]
+        )
+        return max_(prior_year_statelocal_inctax, sales_tax)
diff --git a/setup.py b/setup.py
@@ -7,7 +7,7 @@
 
 setup(
     name="fiscalsim-us",
-    version="0.2.2",
+    version="0.2.3",
     author="Center for Growth and Opportunity at Utah State University (CGO)",
     author_email="fiscalsim@thecgo.org",
     long_description=readme,