Fix individual_eitc reform not responding to parameter changes

changelog.d/fix-individual-eitc-reform.fixed.md

@@ -0,0 +1 @@
+Fixed individual_eitc (Winship) reform not responding to parameter changes in the app.

policyengine_us/parameters/gov/contrib/individual_eitc/agi_eitc_limit.yaml

@@ -1,8 +1,11 @@
-description: Tax filers with combined earned income over this cannot claim the EITC. This is only active if the Winship EITC reform is active.
+description: >-
+  Tax filers with combined AGI at or above this amount cannot claim the individual-income EITC.
+  Set to 0 for no AGI limit (default behavior under the Winship proposal).
 values:
-  2020-01-01: 0
+  2023-01-01: 0
+
 metadata:
-  label: EITC AGI limit
+  label: Individual-income EITC AGI limit
   unit: currency-USD
   period: year
   reference:

policyengine_us/parameters/gov/contrib/individual_eitc/enabled.yaml → policyengine_us/parameters/gov/contrib/individual_eitc/in_effect.yaml

@@ -1,9 +1,11 @@
-description: A proposal by Scott Winship to assess EITC income at the individual level, regardless of filing status.
+description: The individual-income EITC reform (Winship proposal) applies if this is true.
 values:
-  2020-01-01: false
+  0000-01-01: false
+
 metadata:
-  label: Individual-income EITCs
+  label: Individual-income EITC reform in effect
   unit: bool
+  period: year
   reference:
     - title: Reforming the EITC to Reduce Single Parenthood and Ease Work-Family Balance
       href: https://ifstudies.org/blog/reforming-the-eitc-to-reduce-single-parenthood-and-ease-work-family-balance

policyengine_us/reforms/winship.py

@@ -1,78 +1,116 @@
 from policyengine_us.model_api import *
+from policyengine_core.periods import period as period_
 
 
-def create_eitc_winship_reform(parameters, period, bypass=False):
-    if not bypass and not parameters(period).gov.contrib.individual_eitc.enabled:
-        return None
+def create_individual_eitc() -> Reform:
+    """Individual-income EITC reform (Winship proposal).
+
+    Computes EITC separately for each spouse based on their individual
+    earnings, then sums the results. This differs from baseline EITC
+    which uses combined household earnings.
 
-    # Compute EITC under filer_adj_earnings = filer head adj earnings
-    # Then compute EITC under filer_adj_earnings = filer spouse adj earnings
-    # Then set EITC = sum of the two
+    Reference: https://ifstudies.org/blog/reforming-the-eitc-to-reduce-single-parenthood-and-ease-work-family-balance
+    """
 
-    class original_eitc(Variable):
+    class eitc(Variable):
         value_type = float
         entity = TaxUnit
         definition_period = YEAR
-        label = "Original EITC"
+        label = "Federal earned income credit"
         reference = "https://www.law.cornell.edu/uscode/text/26/32#a"
         unit = USD
         defined_for = "eitc_eligible"
 
         def formula(tax_unit, period, parameters):
+            p = parameters(period).gov.contrib.individual_eitc
+            takes_up_eitc = tax_unit("takes_up_eitc", period)
+
+            # Check if reform is active
+            reform_active = p.in_effect
+
+            # Baseline EITC calculation
             maximum = tax_unit("eitc_maximum", period)
             phased_in = tax_unit("eitc_phased_in", period)
             reduction = tax_unit("eitc_reduction", period)
             limitation = max_(0, maximum - reduction)
-            return min_(phased_in, limitation)
+            baseline_eitc = min_(phased_in, limitation)
 
-    class eitc(Variable):
-        value_type = float
-        entity = TaxUnit
-        definition_period = YEAR
-        label = "EITC"
-        unit = USD
-        defined_for = "eitc_eligible"
-
-        def formula(tax_unit, period, parameters):
+            # Reform: compute EITC separately for head and spouse
             person = tax_unit.members
-            simulation = tax_unit.simulation
-            agi = tax_unit("adjusted_gross_income", period)
             adj_earnings = person("adjusted_earnings", period)
             is_head = person("is_tax_unit_head", period)
             is_spouse = person("is_tax_unit_spouse", period)
 
-            filer_earned_head_only = tax_unit.sum(adj_earnings * is_head)
-            filer_earned_spouse_only = tax_unit.sum(adj_earnings * is_spouse)
-
-            head_only_branch = simulation.get_branch("head_only")
-            head_only_branch.set_input(
-                "filer_adjusted_earnings", period, filer_earned_head_only
-            )
-            # Phase out with respect to individual earnings instead of AGI
-            head_only_branch.set_input(
-                "adjusted_gross_income", period, filer_earned_head_only
-            )
-            head_eitc = head_only_branch.calculate("original_eitc", period)
-
-            spouse_only_branch = simulation.get_branch("spouse_only")
-            spouse_only_branch.set_input(
-                "filer_adjusted_earnings", period, filer_earned_spouse_only
-            )
-            spouse_only_branch.set_input(
-                "adjusted_gross_income", period, filer_earned_spouse_only
-            )
-            spouse_eitc = spouse_only_branch.calculate("original_eitc", period)
-
-            agi_limit = parameters(period).gov.contrib.individual_eitc.agi_eitc_limit
-
-            return (agi < agi_limit) * (head_eitc + spouse_eitc)
-
-    class winship_eitc_reform(Reform):
+            head_earnings = tax_unit.sum(adj_earnings * is_head)
+            spouse_earnings = tax_unit.sum(adj_earnings * is_spouse)
+
+            # Get EITC parameters for direct computation
+            child_count = tax_unit("eitc_child_count", period)
+            eitc_params = parameters(period).gov.irs.credits.eitc
+
+            eitc_maximum = eitc_params.max.calc(child_count)
+            phase_in_rate = eitc_params.phase_in_rate.calc(child_count)
+            phase_out_rate = eitc_params.phase_out.rate.calc(child_count)
+            # Use joint phase-out start (matching original behavior)
+            phase_out_start = eitc_params.phase_out.start.calc(
+                child_count
+            ) + eitc_params.phase_out.joint_bonus.calc(child_count)
+
+            # Compute head's individual EITC
+            head_phased_in = min_(eitc_maximum, head_earnings * phase_in_rate)
+            head_phase_out = max_(0, head_earnings - phase_out_start)
+            head_reduction = phase_out_rate * head_phase_out
+            head_limitation = max_(0, eitc_maximum - head_reduction)
+            head_eitc = min_(head_phased_in, head_limitation)
+
+            # Compute spouse's individual EITC
+            spouse_phased_in = min_(eitc_maximum, spouse_earnings * phase_in_rate)
+            spouse_phase_out = max_(0, spouse_earnings - phase_out_start)
+            spouse_reduction = phase_out_rate * spouse_phase_out
+            spouse_limitation = max_(0, eitc_maximum - spouse_reduction)
+            spouse_eitc = min_(spouse_phased_in, spouse_limitation)
+
+            individual_eitc = head_eitc + spouse_eitc
+
+            # Apply AGI limit if set (0 = no limit)
+            agi_limit = p.agi_eitc_limit
+            agi = tax_unit("adjusted_gross_income", period)
+            agi_eligible = where(agi_limit > 0, agi < agi_limit, True)
+
+            reform_eitc = individual_eitc * agi_eligible
+
+            return where(reform_active, reform_eitc, baseline_eitc) * takes_up_eitc
+
+    class reform(Reform):
         def apply(self):
-            self.update_variable(original_eitc)
             self.update_variable(eitc)
 
-    return winship_eitc_reform
+    return reform
+
+
+def create_individual_eitc_reform(parameters, period, bypass: bool = False):
+    if bypass:
+        return create_individual_eitc()
+
+    p = parameters.gov.contrib.individual_eitc
+
+    reform_active = False
+    current_period = period_(period)
+
+    for _ in range(5):
+        if p(current_period).in_effect:
+            reform_active = True
+            break
+        current_period = current_period.offset(1, "year")
+
+    if reform_active:
+        return create_individual_eitc()
+    else:
+        return None
+
 
+individual_eitc_reform = create_individual_eitc_reform(None, None, bypass=True)
 
-winship_reform = create_eitc_winship_reform(None, None, bypass=True)
+# Backward compatibility aliases
+winship_reform = individual_eitc_reform
+create_eitc_winship_reform = create_individual_eitc_reform

policyengine_us/tests/policy/reform/winship.yaml

@@ -1,72 +1,152 @@
-- name: Winship reform gives a bonus
+# Individual-income EITC (Winship) reform tests
+# Tests that EITC is calculated separately for head and spouse earnings
+
+- name: Case 1, individual EITC gives bonus for dual-earner couple.
   period: 2023
   absolute_error_margin: 10
   reforms: policyengine_us.reforms.winship.winship_reform
   input:
+    gov.contrib.individual_eitc.in_effect: true
     gov.contrib.individual_eitc.agi_eitc_limit: 100_000
     people:
-      head:
+      person1:
         employment_income: 20_000
-      spouse:
+        is_tax_unit_head: true
+      person2:
         employment_income: 30_000
-      child_1:
+        is_tax_unit_spouse: true
+      person3:
         age: 5
-      child_2:
+      person4:
         age: 6
+    tax_units:
+      tax_unit:
+        members: [person1, person2, person3, person4]
   output:
-    eitc: 6210 + 6604 # The sum of the EITCs for the two tests below.
-    original_eitc: 2_000
+    # Sum of individual EITCs: head (20k income) + spouse (30k income)
+    # = 6604 + 6210 = 12814
+    eitc: 12_814
 
-- name: EITC for 30k/0k income, to inform the first test.
+- name: Case 2, EITC for 30k head income only.
   period: 2023
   absolute_error_margin: 10
   reforms: policyengine_us.reforms.winship.winship_reform
   input:
+    gov.contrib.individual_eitc.in_effect: true
     gov.contrib.individual_eitc.agi_eitc_limit: 100_000
     people:
-      head:
+      person1:
         employment_income: 30_000
-      spouse:
+        is_tax_unit_head: true
+      person2:
         employment_income: 0
-      child_1:
+        is_tax_unit_spouse: true
+      person3:
         age: 5
-      child_2:
+      person4:
         age: 6
+    tax_units:
+      tax_unit:
+        members: [person1, person2, person3, person4]
   output:
     eitc: 6_210
 
-- name: EITC for 20k/0k income, to inform the first test.
+- name: Case 3, EITC for 20k head income only.
   period: 2023
   absolute_error_margin: 10
   reforms: policyengine_us.reforms.winship.winship_reform
   input:
+    gov.contrib.individual_eitc.in_effect: true
     gov.contrib.individual_eitc.agi_eitc_limit: 100_000
     people:
-      head:
+      person1:
         employment_income: 20_000
-      spouse:
+        is_tax_unit_head: true
+      person2:
         employment_income: 0
-      child_1:
+        is_tax_unit_spouse: true
+      person3:
         age: 5
-      child_2:
+      person4:
         age: 6
+    tax_units:
+      tax_unit:
+        members: [person1, person2, person3, person4]
   output:
     eitc: 6_604
 
-- name: EITC for 20k/0k income, to inform the first test.
+- name: Case 4, AGI limit blocks EITC when AGI exceeds limit.
   period: 2023
   absolute_error_margin: 10
   reforms: policyengine_us.reforms.winship.winship_reform
   input:
-    gov.contrib.individual_eitc.agi_eitc_limit:  19_000
+    gov.contrib.individual_eitc.in_effect: true
+    gov.contrib.individual_eitc.agi_eitc_limit: 19_000
     people:
-      head:
+      person1:
         employment_income: 20_000
-      spouse:
+        is_tax_unit_head: true
+      person2:
+        employment_income: 0
+        is_tax_unit_spouse: true
+      person3:
+        age: 5
+      person4:
+        age: 6
+    tax_units:
+      tax_unit:
+        members: [person1, person2, person3, person4]
+  output:
+    # AGI (20k) >= limit (19k), so no EITC
+    eitc: 0
+
+- name: Case 5, reform disabled returns baseline EITC.
+  period: 2023
+  absolute_error_margin: 10
+  reforms: policyengine_us.reforms.winship.winship_reform
+  input:
+    gov.contrib.individual_eitc.in_effect: false
+    people:
+      person1:
+        employment_income: 20_000
+        is_tax_unit_head: true
+      person2:
+        employment_income: 30_000
+        is_tax_unit_spouse: true
+      person3:
+        age: 5
+      person4:
+        age: 6
+    tax_units:
+      tax_unit:
+        members: [person1, person2, person3, person4]
+  output:
+    # Baseline EITC for combined 50k income with 2 children
+    # Should be much lower than individual EITC
+    eitc: 2_000
+
+- name: Case 6, no AGI limit when set to 0.
+  period: 2023
+  absolute_error_margin: 10
+  reforms: policyengine_us.reforms.winship.winship_reform
+  input:
+    gov.contrib.individual_eitc.in_effect: true
+    gov.contrib.individual_eitc.agi_eitc_limit: 0
+    people:
+      person1:
+        employment_income: 100_000
+        is_tax_unit_head: true
+      person2:
         employment_income: 0
-      child_1:
+        is_tax_unit_spouse: true
+      person3:
         age: 5
-      child_2:
+      person4:
         age: 6
+    tax_units:
+      tax_unit:
+        members: [person1, person2, person3, person4]
   output:
+    # AGI limit of 0 means no limit - should still get individual EITC
+    # Head with 100k income is past EITC phase-out, so 0
     eitc: 0