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Add WA state income tax reform#7761

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daphnehanse11:wa-income-tax
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Add WA state income tax reform#7761
daphnehanse11 wants to merge 4 commits intoPolicyEngine:mainfrom
daphnehanse11:wa-income-tax

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@daphnehanse11 daphnehanse11 commented Mar 12, 2026 •
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Summary

Implements Washington State SSB 6346 as a contributed reform:

  1. 9.9% income tax on high earners (Secs. 201-310)
  2. Working Families Tax Credit age expansion (Sec. 901)

Closes #7758.

Reform type

C: Comprehensive tax reform — new state income tax + WFTC eligibility expansion.

Parameters created

  • gov/contrib/states/wa/sb6346/in_effect.yaml — Boolean toggle (default: false)
  • gov/contrib/states/wa/sb6346/rate.yaml — 9.9% tax rate (effective 2028)
  • gov/contrib/states/wa/sb6346/standard_deduction/amount.yaml — $1,000,000 deduction
  • gov/contrib/states/wa/sb6346/charitable_deduction/cap/individual.yaml — $100,000 cap
  • gov/contrib/states/wa/sb6346/charitable_deduction/cap/joint.yaml — $100,000 cap (joint)
  • gov/contrib/states/wa/sb6346/wftc/min_age.yaml — Minimum age 18 for WFTC expansion

Variables defined

Income tax (Secs. 201-310)

  • wa_income_tax_base_income — NEW — Federal AGI as base (Secs. 302-306 modifications deferred)
  • wa_income_tax_charitable_deduction — NEW — Charitable deduction capped at $100K
  • wa_income_tax_standard_deduction — NEW — $1M standard deduction (same for all filers)
  • wa_income_tax_taxable_income — NEW — Base income minus deductions, floored at $0
  • wa_income_tax — OVERRIDE — 9.9% of taxable income + capital gains tax - refundable credits

WFTC expansion (Sec. 901)

  • wa_working_families_tax_credit — OVERRIDE — Expands eligibility to filers aged 18+ with earned income (previously required age 25+ via federal EITC eligibility)

Key implementation notes

  • The $1M standard deduction is shared by married couples (not doubled) per Sec. 310
  • Charitable deduction cap is $100K individual / $100K joint combined per Sec. 307
  • Base income simplified to federal AGI (full Secs. 302-306 modifications deferred)
  • WFTC expansion allows 18-24 year olds without children to receive the credit even without federal EITC eligibility
  • Bill passed both chambers March 2026; governor pledged to sign

Registration

  • Registered in reforms/reforms.py with factory function pattern
  • No modify_parameters() needed — overrides existing variables

Test coverage

11 test cases covering:

  • Income tax (8 tests): Single/married high earners, below-threshold, non-WA, charitable cap
  • WFTC expansion (3 tests): Age 22 with earnings (eligible), age 22 no earnings (ineligible), age 30 with earnings (baseline eligible)

Regulatory sources

Deferred for future enhancement

  • Full Secs. 302-306 base income modifications (LTCG swap, tax-exempt interest, state tax add-back)
  • CPI indexing of $1M standard deduction (Oct 2029 for tax year 2030, Seattle-area CPI-U)
  • ITIN filer eligibility for WFTC (Sec. 901(2)(a)(ii)(A))
  • Married-filing-separately WFTC eligibility (Sec. 901(2)(a)(ii)(B))
  • 5% revenue earmark for Fair Start for Kids Account (not household-level)

Files added/modified

  • policyengine_us/parameters/gov/contrib/states/wa/sb6346/ — 6 parameter files
  • policyengine_us/reforms/states/wa/sb6346/sb6346.py — reform implementation
  • policyengine_us/reforms/states/wa/sb6346/__init__.py — exports
  • policyengine_us/reforms/states/wa/__init__.py — package init
  • policyengine_us/reforms/reforms.py — registration
  • policyengine_us/tests/policy/contrib/states/wa/sb6346/sb6346.yaml — 11 tests
  • changelog.d/wa-income-tax.added.md — changelog entry
  • sources/working_references.md — reference documentation

daphnehanse11 and others added 3 commits March 12, 2026 09:46
@daphnehanse11 @claude
Initial commit for WA state income tax reform
8ab1a77 
Starting implementation of WA Senate Bill 6346-S: 9.9% income tax on household incomes over $1M.

Co-Authored-By: Claude Opus 4.6 <noreply@anthropic.com>
@daphnehanse11 @claude
Add WA SSB 6346 income tax reform
6d390e4 
Co-Authored-By: Claude Opus 4.6 <noreply@anthropic.com>
@daphnehanse11 @claude
Add WFTC age expansion from SSB 6346 Sec. 901
eed0ca1 
Co-Authored-By: Claude Opus 4.6 <noreply@anthropic.com>
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daphnehanse11 commented Mar 12, 2026

Note: Inflation indexing of the $1M standard deduction

SSB 6346 Sec. 312 specifies that the $1M standard deduction should be indexed for inflation starting October 2029 (for tax year 2030), using the Seattle-area CPI-U (all items, all urban consumers), rounded to the nearest $1,000.

We don't currently have the Seattle-area CPI-U in PolicyEngine. A reasonable approximation would be to use the national CPI-U uprating instead — the difference between Seattle-area and national CPI-U is typically small. We could add uprating: gov.bls.cpi.cpi_u (or equivalent) to the standard_deduction/amount.yaml parameter with rounding to nearest $1,000 starting 2030.

Worth implementing as a follow-up once we decide on the right CPI proxy.

@daphnehanse11 @claude
Add CPI-U uprating to WA standard deduction
86012d6 
Uses national CPI-U as proxy for Seattle-area CPI-U specified in
Sec. 312. Rounds to nearest $1,000. Indexing starts tax year 2030.

Co-Authored-By: Claude Opus 4.6 <noreply@anthropic.com>
@daphnehanse11 daphnehanse11 marked this pull request as ready for review March 13, 2026 14:34
@daphnehanse11 daphnehanse11 requested a review from DTrim99 March 13, 2026 14:46
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DTrim99 commented Mar 13, 2026

PR Review: WA SSB 6346 Income Tax Reform

Overall Assessment: ✅ APPROVE with Suggestions

This is a well-implemented reform that follows PolicyEngine patterns correctly. The implementation is comprehensive with good test coverage. CI is passing. A few minor improvements are suggested.

🟢 Positive Observations

  • Clean code structure: Proper use of add(), where(), max_(), and vectorized operations
  • No hard-coded values: All values come from parameters
  • Correct entity levels: All variables use TaxUnit appropriately
  • Proper defined_for usage: StateCode.WA correctly specified
  • Good PDF references: All parameter hrefs include #page=XX
  • Factory function pattern: Correctly implemented following modern reform patterns
  • 11 test cases: Good baseline coverage including income tax, WFTC expansion, non-WA resident

🟡 Should Address (Minor)

1. Parameter Description Format (wftc/min_age.yaml:1)

Current: Minimum age for WFTC eligibility under SSB 6346, for individuals who do not meet the federal EITC age requirement.

Suggestion: Washington sets this age threshold for expanded Working Families Tax Credit eligibility under the SSB 6346 reform.

(Per policyengine-parameter-patterns: use "this" placeholder, single sentence, end with "under the [Program] reform")

2. Parameter Label Missing State (wftc/min_age.yaml:9)

Current: label: SSB 6346 WFTC minimum age for expanded eligibility

Suggestion: label: Washington SSB 6346 WFTC minimum age threshold

(Per policyengine-parameter-patterns: labels should follow [State] [PROGRAM] [description])

🟢 Test Coverage Suggestions (Optional but Recommended)

The test suite is solid but could benefit from a few additional boundary tests:

Scenario Status Notes
$1M threshold boundaries ⚠️ Partial Case 6 tests exactly $1M; consider adding $999,999 and $1,000,001
Charitable cap (individual) ✅ Good Case 8 tests over cap ($200k → $100k)
Charitable cap (joint) ⚠️ Missing Add test with married couple exceeding $100k combined
WFTC age boundaries ⚠️ Partial Case 9 tests age 22; consider adding age 17 (ineligible) and age 18 (minimum)
Reform disabled ❌ Missing Add test with in_effect: false to verify reform toggle

Suggested additional test: Married couple with $120k combined charitable ($60k each) to verify joint cap at $100k.

✅ Validation Summary

Check Result
CI Status ✅ All passing
Regulatory Accuracy ✅ Matches SSB 6346 provisions
Reference Quality ✅ All parameters have PDF page refs
Code Patterns ✅ Follows PolicyEngine standards
Test Coverage ✅ Good (11 cases)

📋 Implementation Notes

The PR correctly documents deferred items:

  • Full Secs. 302-306 base income modifications (LTCG swap, etc.)
  • CPI indexing (Seattle-area CPI vs national CPI)
  • ITIN filer eligibility
  • Married-filing-separately WFTC

This is a reasonable scope for initial implementation.

Recommendation: Merge after addressing the minor parameter formatting suggestions. The additional test cases are optional but would improve robustness.

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@DTrim99 DTrim99 Awaiting requested review from DTrim99

@PavelMakarchuk PavelMakarchuk Awaiting requested review from PavelMakarchuk

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Add reform for WA state income tax

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@daphnehanse11 @DTrim99 @PavelMakarchuk