Count only the filer's and spouse's payroll taxes in the refundable CTC and Additional Medicare Tax, and in the CRFB surtax base

changelog.d/fix-ctc-ss-tax-filer-spouse.fixed.md

@@ -0,0 +1 @@
+The refundable child tax credit's social security taxes (26 U.S.C. 24(d)(2)) and the Additional Medicare Tax (Form 8959) now count only the head's and spouse's wages and self-employment income, not a tax unit dependent's. The CRFB AGI surtax's expanded base now adds only the head's and spouse's contributions, exclusions and tax-exempt Social Security.

policyengine_us/parameters/gov/contrib/crfb/surtax/increased_base/in_effect.yaml

@@ -3,6 +3,9 @@ metadata:
   unit: bool
   period: year
   label: CRFB surtax expanded base in effect
+  reference:
+    - title: "Committee for a Responsible Federal Budget, Break Glass: A Plan for the Next Economic Shock, footnote 2"
+      href: https://www.crfb.org/papers/break-glass-plan-next-economic-shock
 
 values:
   0000-01-01: false

policyengine_us/parameters/gov/contrib/crfb/surtax/increased_base/sources.yaml

@@ -1,6 +1,18 @@
 description: Additional income sources for CRFB surtax expanded base beyond IRS gross income.
 values:
   2010-01-01:
+    # CRFB's Break Glass plan (footnote 2) applies the surtax to "a broad
+    # definition of income that includes Adjusted Gross Income (AGI) plus"
+    # retirement contributions, HSA/MSA contributions, deductible student
+    # loan interest, Social Security not counted toward AGI, tax-free bond
+    # interest and employer-provided health insurance. It does not address
+    # dependents. The base starts from the return's AGI, so person-level
+    # sources are summed over the head and spouse only, the people whose AGI
+    # it is; that attribution is inferred. Tax-unit-level sources describe
+    # the head's and spouse's own return. Which items belong, and which
+    # variable stands for each, is a separate question
+    # (PolicyEngine/policyengine-us#9763); the footnote does not list the
+    # foreign earned income exclusion.
     # Retirement contributions (IRA, 401k, 403b)
     - traditional_ira_contributions
     - traditional_401k_contributions
@@ -10,7 +22,7 @@ values:
     # Deductible student loan interest
     - student_loan_interest_ald
     # Social Security not counted toward AGI
-    - tax_exempt_social_security
+    - filer_tax_exempt_social_security
     # Foreign earnings exclusion (tax unit level, may need special handling)
     - foreign_earned_income_exclusion
     # Tax-free bond interest
@@ -22,3 +34,6 @@ metadata:
   unit: list
   period: year
   label: CRFB surtax expanded base additional sources
+  reference:
+    - title: "Committee for a Responsible Federal Budget, Break Glass: A Plan for the Next Economic Shock, footnote 2"
+      href: https://www.crfb.org/papers/break-glass-plan-next-economic-shock

policyengine_us/parameters/gov/irs/credits/ctc/refundable/social_security/add.yaml

@@ -1,17 +1,19 @@
 description: The IRS defines social security taxes under the Child Tax Credit to include the following variables.
 values:
   2018-01-01:
-    # Person:
+    # Person (summed over the head and spouse only):
     - employee_social_security_tax
     - employee_medicare_tax
+    - self_employment_tax_ald_person
+    # Tax Unit (describes the head's and spouse's own return):
     - unreported_payroll_tax
-    # Tax Unit:
-    - self_employment_tax_ald
     - additional_medicare_tax
 metadata:
   unit: list
   period: year
-  label: Child Tax Credit added social security taxes 
+  label: Child Tax Credit added social security taxes
   reference:
     - title: 26 U.S. Code § 24(d)(2)(A)
       href: https://www.law.cornell.edu/uscode/text/26/24#d_2_A
+    - title: 2024 Schedule 8812 (Form 1040), Part II-B, lines 21 to 23
+      href: https://www.irs.gov/pub/irs-prior/f1040s8--2024.pdf#page=2

policyengine_us/reforms/biden/budget_2025/medicare_and_investment_tax_increase.py

@@ -19,7 +19,8 @@ def formula(tax_unit, period, parameters):
                 "payroll_tax_gross_wages",
                 "taxable_self_employment_income",
             ]
-            wages_plus_se = add(tax_unit, period, ELEMENTS)
+            # As in the baseline, only the head's and spouse's earnings.
+            wages_plus_se = tax_unit_non_dep_add(tax_unit, period, ELEMENTS)
             exclusion = amc.exclusion[tax_unit("filing_status", period)]
             base = max_(0, wages_plus_se - exclusion)
             base_tax = amc.rate * base

policyengine_us/reforms/congress/wyden_smith/ctc_expansion.py

@@ -57,22 +57,10 @@ def formula(tax_unit, period, parameters):
 
             relevant_earnings = earnings_over_threshold * phase_in_rate
 
-            # Compute "Social Security taxes" as defined in the US Code for the ACTC.
-            # This includes OASDI and Medicare payroll taxes, as well as half
-            # of self-employment taxes.
-            SS_ADD_VARIABLES = [
-                # Person:
-                "employee_social_security_tax",
-                "employee_medicare_tax",
-                "unreported_payroll_tax",
-                # Tax unit:
-                "self_employment_tax_ald",
-                "additional_medicare_tax",
-            ]
-            SS_SUBTRACT_VARIABLES = ["excess_payroll_tax_withheld"]
-            social_security_tax = add(tax_unit, period, SS_ADD_VARIABLES) - add(
-                tax_unit, period, SS_SUBTRACT_VARIABLES
-            )
+            # "Social Security taxes" as defined in 26 U.S.C. 24(d)(2) for the
+            # ACTC: the head's and spouse's OASDI and Medicare payroll taxes and
+            # half of their self-employment taxes, as in the baseline.
+            social_security_tax = tax_unit("ctc_social_security_tax", period)
             eitc = tax_unit("eitc", period)
             social_security_excess = max_(0, social_security_tax - eitc)
             qualifying_children = tax_unit("ctc_qualifying_children", period)

policyengine_us/reforms/crfb/agi_surtax.py

@@ -15,7 +15,15 @@ def formula(tax_unit, period, parameters):
             agi = tax_unit("adjusted_gross_income", period)
             p = parameters(period).gov.contrib.crfb.surtax
             if p.increased_base.in_effect:
-                additional_sources = add(tax_unit, period, p.increased_base.sources)
+                # CRFB's Break Glass plan (footnote 2) defines the base as
+                # AGI plus other income. AGI is this return's, so the base
+                # adds the head's and spouse's own amounts; a tax unit
+                # dependent's income and deductions are on the dependent's
+                # own return. The plan does not address dependents, so this
+                # attribution is inferred.
+                additional_sources = tax_unit_non_dep_add(
+                    tax_unit, period, p.increased_base.sources
+                )
                 agi = agi + additional_sources
             filing_status = tax_unit("filing_status", period)
             joint = filing_status == filing_status.possible_values.JOINT