Harris capital gains tax reform

Fixes #5203
PolicyEngine · Oct 14, 2024 · 029423d · 029423d
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diff --git a/changelog_entry.yaml b/changelog_entry.yaml
@@ -0,0 +1,4 @@
+- bump: minor
+  changes:
+    added:
+    - Harris capital gains tax reform.
diff --git a/policyengine_us/parameters/gov/contrib/harris/capital_gains/brackets.yaml b/policyengine_us/parameters/gov/contrib/harris/capital_gains/brackets.yaml
@@ -0,0 +1,194 @@
+description: Harris proposed to tax capital gains at the following rates.
+rates:
+  description: Long term capital gain and qualified dividends (regular/non-AMT) rate
+  1:
+    2013-01-01: 0
+  2:
+    2013-01-01: 0.15
+  3:
+    2013-01-01: 0.2
+  4: 
+    2013-01-01: 0.28
+  metadata:
+    unit: /1
+thresholds:
+  description: Top thresholds of long-term capital gains and qualified dividends (regular/non-AMT) tax brackets
+  metadata:
+    unit: currency-USD
+    period: year
+    reference:
+      - title: 2024 IRS data release
+        href: https://www.irs.gov/pub/irs-drop/rp-23-34.pdf#page=8
+      - title: 2023 IRS data release
+        href: https://www.irs.gov/pub/irs-drop/rp-22-38.pdf#page=8
+      - title: 2022 IRS data release
+        href: https://www.irs.gov/pub/irs-drop/rp-21-45.pdf#page=8
+      - title: 2021 IRS data release
+        href: https://www.irs.gov/pub/irs-drop/rp-20-45.pdf#page=8
+      - title: 2020 IRS data release
+        href: https://www.irs.gov/pub/irs-drop/rp-19-44.pdf#page=8
+      - title: 2019 IRS data release
+        href: https://www.irs.gov/pub/irs-drop/rp-18-57.pdf#page=8
+      - title: Internal Revenue Code §1(j)(5)(B)
+        # IRC defines amounts as of 2018.
+        # Defines COLA with rounded up to the nearest multiple of $50.
+        href: https://www.law.cornell.edu/uscode/text/26/1#j_5_B
+  1:
+    HEAD_OF_HOUSEHOLD:
+      values:
+        2013-01-01: 48_600
+        2014-01-01: 49_400
+        2015-01-01: 50_200
+        2016-01-01: 50_400
+        2017-01-01: 50_800
+        2018-01-01: 51_700
+        2019-01-01: 52_750
+        2020-01-01: 53_600
+        2021-01-01: 54_100
+        2022-01-01: 55_800
+        2023-01-01: 59_750
+        2024-01-01: 63_000
+    JOINT:
+      values:
+        2013-01-01: 72_500
+        2014-01-01: 73_800
+        2015-01-01: 74_900
+        2016-01-01: 75_300
+        2017-01-01: 75_900
+        2018-01-01: 77_200
+        2019-01-01: 78_750
+        2020-01-01: 80_000
+        2021-01-01: 80_800
+        2022-01-01: 83_350
+        2023-01-01: 89_250
+        2024-01-01: 94_050
+    SEPARATE:
+      values:
+        2013-01-01: 36_250
+        2014-01-01: 36_900
+        2015-01-01: 37_450
+        2016-01-01: 37_650
+        2017-01-01: 37_950
+        2018-01-01: 38_600
+        2019-01-01: 39_375
+        2020-01-01: 40_000
+        2021-01-01: 40_400
+        2022-01-01: 41_675
+        2023-01-01: 44_625
+        2024-01-01: 47_025
+    SINGLE:
+      values:
+        2013-01-01: 36_250
+        2014-01-01: 36_900
+        2015-01-01: 37_450
+        2016-01-01: 37_650
+        2017-01-01: 37_950
+        2018-01-01: 38_600
+        2019-01-01: 39_375
+        2020-01-01: 40_000
+        2021-01-01: 40_400
+        2022-01-01: 41_675
+        2023-01-01: 44_625
+        2024-01-01: 47_025
+    SURVIVING_SPOUSE:
+      values:
+        2013-01-01: 72_500
+        2014-01-01: 73_800
+        2015-01-01: 74_900
+        2016-01-01: 75_300
+        2017-01-01: 75_900
+        2018-01-01: 77_200
+        2019-01-01: 78_750
+        2020-01-01: 80_000
+        2021-01-01: 80_800
+        2022-01-01: 83_350
+        2023-01-01: 89_250
+        2024-01-01: 94_050
+  2:
+    HEAD_OF_HOUSEHOLD:
+      values:
+        2013-01-01: 425_000
+        2014-01-01: 432_200
+        2015-01-01: 439_000
+        2016-01-01: 441_000
+        2017-01-01: 444_550
+        2018-01-01: 452_400
+        2019-01-01: 461_700
+        2020-01-01: 469_050
+        2021-01-01: 473_750
+        2022-01-01: 488_500
+        2023-01-01: 523_050
+        2024-01-01: 551_350
+    JOINT:
+      values:
+        2013-01-01: 450_000
+        2014-01-01: 457_600
+        2015-01-01: 464_850
+        2016-01-01: 466_950
+        2017-01-01: 470_700
+        2018-01-01: 479_000
+        2019-01-01: 488_850
+        2020-01-01: 496_600
+        2021-01-01: 501_600
+        2022-01-01: 517_200
+        2023-01-01: 553_850
+        2024-01-01: 583_750
+    SEPARATE:
+      values:
+        2013-01-01: 225_000
+        2014-01-01: 228_800
+        2015-01-01: 232_425
+        2016-01-01: 233_475
+        2017-01-01: 235_350
+        2018-01-01: 239_500
+        2019-01-01: 244_425
+        2020-01-01: 248_300
+        2021-01-01: 250_800
+        2022-01-01: 258_600
+        2023-01-01: 276_900
+        2024-01-01: 291_850
+    SINGLE:
+      values:
+        2013-01-01: 400_000
+        2014-01-01: 406_750
+        2015-01-01: 413_200
+        2016-01-01: 415_050
+        2017-01-01: 418_400
+        2018-01-01: 425_800
+        2019-01-01: 434_550
+        2020-01-01: 441_450
+        2021-01-01: 445_850
+        2022-01-01: 459_750
+        2023-01-01: 492_300
+        2024-01-01: 518_900
+    SURVIVING_SPOUSE:
+      values:
+        2013-01-01: 450_000
+        2014-01-01: 457_600
+        2015-01-01: 464_850
+        2016-01-01: 466_950
+        2017-01-01: 470_700
+        2018-01-01: 479_000
+        2019-01-01: 488_850
+        2020-01-01: 496_600
+        2021-01-01: 501_600
+        2022-01-01: 517_200
+        2023-01-01: 553_850
+        2024-01-01: 583_750
+
+  3:
+      HEAD_OF_HOUSEHOLD:
+        values:
+          2013-01-01: 1_000_000
+      JOINT:
+        values:
+          2013-01-01: 1_000_000
+      SEPARATE:
+        values:
+          2013-01-01: 1_000_000
+      SINGLE:
+        values:
+          2013-01-01: 1_000_000
+      SURVIVING_SPOUSE:
+        values:
+          2013-01-01: 1_000_000
diff --git a/policyengine_us/parameters/gov/contrib/harris/capital_gains/in_effect.yaml b/policyengine_us/parameters/gov/contrib/harris/capital_gains/in_effect.yaml
@@ -0,0 +1,11 @@
+description: Senator harris has proposed an additional, increased capital gains tax bracket, which comes into effect if this is true.
+metadata:
+  unit: bool
+  period: year
+  label: Harris ciptal gains tax reform in effect
+  reference: 
+    - title: Remarks by Vice President Harris at a Campaign Event| North Hampton, NH
+      href: https://www.whitehouse.gov/briefing-room/speeches-remarks/2024/09/04/remarks-by-vice-president-harris-at-a-campaign-event-north-hampton-nh/
+
+values:
+  0000-01-01: false
diff --git a/policyengine_us/reforms/harris/capital_gains/__init__.py b/policyengine_us/reforms/harris/capital_gains/__init__.py
@@ -0,0 +1,3 @@
+from .harris_capital_gains import (
+    create_harris_capital_gains_reform,
+)
diff --git a/policyengine_us/reforms/harris/capital_gains/harris_capital_gains.py b/policyengine_us/reforms/harris/capital_gains/harris_capital_gains.py
@@ -0,0 +1,144 @@
+from policyengine_us.model_api import *
+
+
+def create_harris_capital_gains() -> 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
+
+            p_ref = parameters(period).gov.contrib.harris.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 = p_ref.brackets.thresholds["1"][filing_status]
+            second_threshold = p_ref.brackets.thresholds["2"][filing_status]
+            third_threshold = p_ref.brackets.thresholds["3"][filing_status]
+
+            income_ordinarily_under_second_rate = clip(
+                taxable_income, 0, first_threshold
+            )
+            cg_in_first_bracket = max_(
+                0, income_ordinarily_under_second_rate - income_less_ancg
+            )
+
+            income_ordinarily_under_third_rate = clip(
+                taxable_income, 0, second_threshold
+            )
+            cg_in_second_bracket = min_(
+                max_(0, adjusted_net_cg - cg_in_first_bracket),
+                max_(
+                    0,
+                    income_ordinarily_under_third_rate
+                    - (non_cg_taxable_income + cg_in_first_bracket),
+                ),
+            )
+            income_ordinarily_under_fourth_rate = clip(
+                taxable_income, 0, third_threshold
+            )
+
+            cg_in_third_bracket = min_(
+                max_(
+                    0,
+                    adjusted_net_cg
+                    - cg_in_first_bracket
+                    - cg_in_second_bracket,
+                ),
+                max_(
+                    0,
+                    income_ordinarily_under_fourth_rate
+                    - (
+                        non_cg_taxable_income
+                        + cg_in_first_bracket
+                        + cg_in_second_bracket
+                    ),
+                ),
+            )
+
+            cg_in_fourth_bracket = max_(
+                adjusted_net_cg
+                - cg_in_first_bracket
+                - cg_in_second_bracket
+                - cg_in_third_bracket,
+                0,
+            )
+
+            main_cg_tax = (
+                cg_in_first_bracket * p_ref.brackets.rates["1"]
+                + cg_in_second_bracket * p_ref.brackets.rates["2"]
+                + cg_in_third_bracket * p_ref.brackets.rates["3"]
+                + cg_in_fourth_bracket * p_ref.brackets.rates["4"]
+            )
+
+            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_harris_capital_gains_reform(
+    parameters, period, bypass: bool = False
+):
+    if bypass:
+        return create_harris_capital_gains()
+
+    p = parameters(period).gov.contrib.harris.capital_gains
+
+    if p.in_effect:
+        return create_harris_capital_gains()
+    else:
+        return None
+
+
+harris_capital_gains = create_harris_capital_gains_reform(
+    None, None, bypass=True
+)
diff --git a/policyengine_us/reforms/reforms.py b/policyengine_us/reforms/reforms.py
@@ -50,6 +50,9 @@
 from .treasury.repeal_dependent_exemptions import (
     create_repeal_dependent_exemptions_reform,
 )
+from .harris.capital_gains import (
+    create_harris_capital_gains_reform,
+)
 
 from policyengine_core.reforms import Reform
 import warnings
@@ -120,6 +123,9 @@ def create_structural_reforms_from_parameters(parameters, period):
     repeal_dependent_exemptions = create_repeal_dependent_exemptions_reform(
         parameters, period
     )
+    harris_capital_gains = create_harris_capital_gains_reform(
+        parameters, period
+    )
 
     reforms = [
         afa_reform,
@@ -146,6 +152,7 @@ def create_structural_reforms_from_parameters(parameters, period):
         family_security_act_2024_ctc,
         family_security_act_2024_eitc,
         repeal_dependent_exemptions,
+        harris_capital_gains,
     ]
     reforms = tuple(filter(lambda x: x is not None, reforms))