Index Washington WFTC maximum qualifying income to the current tax year

changelog.d/wa-wftc-current-year-income-limit.fixed.md

@@ -0,0 +1 @@
+Indexed the Washington Working Families Tax Credit maximum qualifying income and investment-income limit to the current-year federal EITC figures instead of freezing them at 2022 values.

policyengine_us/tests/policy/baseline/gov/states/wa/tax/income/credits/wa_working_families_tax_credit.yaml

@@ -54,7 +54,7 @@
     people:
       head:
         age: 30
-        employment_income: 43_490
+        employment_income: 49_084
         has_tin: true
         ssn_card_type: CITIZEN
         is_tax_unit_head: true
@@ -77,8 +77,9 @@
         members: [head, child]
         state_code: WA
   output:
-    # Per RCW 82.08.0206(3)(f), minimum credit is $50
-    wa_working_families_tax_credit: 50.05
+    # At the 2024 head-of-household one-child federal EITC limit ($49,084) the
+    # credit reaches the $50 statutory minimum (RCW 82.08.0206(3)(f)).
+    wa_working_families_tax_credit: 50.02
 
 - name: Case 5, mid-phaseout gives correctly reduced credit.
   period: 2024
@@ -87,7 +88,7 @@
     people:
       head:
         age: 30
-        employment_income: 40_992
+        employment_income: 46_584
         has_tin: true
         ssn_card_type: CITIZEN
         is_tax_unit_head: true
@@ -110,7 +111,10 @@
         members: [head, child]
         state_code: WA
   output:
-    wa_working_families_tax_credit: 344.82
+    # 2024 head-of-household, one child: maximum $640, phase-out start $44,084
+    # (limit $49,084 less the $5,000 band), rate (640 - 50) / 5,000 = 11.8%.
+    # 640 - 0.118 x (46,584 - 44,084) = 345.
+    wa_working_families_tax_credit: 345.02
 
 - name: Case 6, joint filer with 1 child and moderate income receives credit.
   period: 2024
@@ -158,7 +162,7 @@
       head:
         age: 40
         employment_income: 40_000
-        unemployment_compensation: 16_000
+        unemployment_compensation: 25_000
         has_tin: true
         ssn_card_type: CITIZEN
         is_tax_unit_head: true
@@ -196,13 +200,14 @@
         members: [head, spouse, child1, child2, child3]
         state_code: WA
   output:
-    # Earned income ($40,000) is below the 3-child phase-out start (~$54,190),
-    # but AGI ($56,000, incl. $16,000 unemployment) lands inside the phase-out
-    # band. RCW 82.08.0206(3)(b) measures the reduction against the federal
-    # phase-out income = max(earned income, AGI) = $56,000, so the $1,330
-    # maximum tapers at 25.6% over the ~$1,810 of excess to ~$866.57 rather
-    # than paying the full $1,330. See policyengine-taxsim#986.
-    wa_working_families_tax_credit: 866.57
+    # Earned income ($40,000) is below the 2025 three-child phase-out start
+    # ($63,675 = limit $68,675 less the $5,000 band), but AGI ($65,000, incl.
+    # $25,000 unemployment) lands inside the phase-out band. RCW 82.08.0206(3)(b)
+    # measures the reduction against the federal phase-out income =
+    # max(earned income, AGI) = $65,000, so the $1,330 maximum tapers at 25.6%
+    # over the $1,325 of excess to ~$990.83 rather than paying the full $1,330.
+    # See policyengine-taxsim#986.
+    wa_working_families_tax_credit: 990.83
 
 # ESSB 6346 Sec. 901 - WFTC Age Expansion tests (effective 2029)
 
@@ -685,3 +690,133 @@
         state_code: WA
   output:
     wa_working_families_tax_credit: 0
+
+- name: Case 16, income limit indexes to the current year (taxsim #1155).
+  period: 2023
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 49
+        employment_income: 20_412.535
+        has_tin: true
+        ssn_card_type: CITIZEN
+        is_tax_unit_head: true
+      spouse:
+        age: 52
+        employment_income: 29_635.352
+        has_tin: true
+        ssn_card_type: CITIZEN
+        is_tax_unit_spouse: true
+      child:
+        age: 10
+        has_tin: true
+        ssn_card_type: CITIZEN
+        is_tax_unit_dependent: true
+    tax_units:
+      tax_unit:
+        members: [head, spouse, child]
+        filing_status: JOINT
+        would_file_taxes_voluntarily: true
+        takes_up_eitc: true
+    spm_units:
+      spm_unit:
+        members: [head, spouse, child]
+    households:
+      household:
+        members: [head, spouse, child]
+        state_code: WA
+  output:
+    # The maximum qualifying income equals Washington DOR's published 2023
+    # married-filing-jointly one-child limit of $53,120, not the frozen 2022
+    # limit of $49,620.
+    wa_working_families_tax_credit_maximum_qualifying_income: 53_120
+    # AGI $50,047.89 is below that limit. Maximum $625, phase-out start $48,120
+    # (limit $53,120 less the $5,000 band), rate (625 - 50) / 5,000 = 11.5%.
+    # 625 - 0.115 x (50,047.89 - 48,120) = 403.
+    wa_working_families_tax_credit: 403.29
+
+- name: Case 17, two-child near-ceiling credit reaches the minimum (2-child coverage).
+  period: 2023
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 35
+        employment_income: 59_470
+        has_tin: true
+        ssn_card_type: CITIZEN
+        is_tax_unit_head: true
+      spouse:
+        age: 35
+        has_tin: true
+        ssn_card_type: CITIZEN
+        is_tax_unit_spouse: true
+      child1:
+        age: 5
+        has_tin: true
+        ssn_card_type: CITIZEN
+        is_tax_unit_dependent: true
+      child2:
+        age: 8
+        has_tin: true
+        ssn_card_type: CITIZEN
+        is_tax_unit_dependent: true
+    tax_units:
+      tax_unit:
+        members: [head, spouse, child1, child2]
+        filing_status: JOINT
+        would_file_taxes_voluntarily: true
+        takes_up_eitc: true
+    spm_units:
+      spm_unit:
+        members: [head, spouse, child1, child2]
+    households:
+      household:
+        members: [head, spouse, child1, child2]
+        state_code: WA
+  output:
+    # 2023 married-filing-jointly two-child ceiling = $59,478 (Washington DOR).
+    # Maximum $940, phase-out start $54,478 (limit less the $5,000 band), rate
+    # (940 - 50) / 5,000 = 17.8%. Income $59,470 is $8 below the ceiling, so the
+    # credit is at the $50 statutory minimum region: 940 - 0.178 x (59,470 -
+    # 54,478) = 51.43. (The ceiling itself is pinned to DOR's $53,120 in the
+    # one-child case above; DOR rounds to whole dollars, whereas the model
+    # carries the federal indexing to the cent.)
+    wa_working_families_tax_credit: 51.43
+
+- name: Case 18, investment-income limit indexes to the current year.
+  period: 2023
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 30
+        employment_income: 15_000
+        taxable_interest_income: 10_500
+        has_tin: true
+        ssn_card_type: CITIZEN
+        is_tax_unit_head: true
+      child:
+        age: 5
+        has_tin: true
+        ssn_card_type: CITIZEN
+        is_tax_unit_dependent: true
+    tax_units:
+      tax_unit:
+        members: [head, child]
+        filing_status: HEAD_OF_HOUSEHOLD
+        would_file_taxes_voluntarily: true
+        takes_up_eitc: true
+    spm_units:
+      spm_unit:
+        members: [head, child]
+    households:
+      household:
+        members: [head, child]
+        state_code: WA
+  output:
+    # Investment income $10,500 exceeds the frozen 2022 federal limit ($10,300)
+    # but is below the current-year 2023 limit ($11,000, Washington DOR), so the
+    # filer remains eligible and receives the full 2023 one-child maximum.
+    wa_working_families_tax_credit: 625

policyengine_us/tests/policy/baseline/partners/analytics_coverage/edge_cases/state/wa/working_families_tax_credit.yaml

@@ -2,9 +2,10 @@
 # EITC rules as in effect 2022-06-09. 2026 maximum amounts (2025 statutory
 # values uprated by gov.irs.uprating, no rounding applied at runtime):
 # 0 kids $342.59, 1 kid $674.96, 2 kids $1,017.55, 3+ kids $1,360.14;
-# $50 minimum. Income ceiling = frozen-2022 EITC maximum AGI; the credit
-# phases from the maximum down to $50 over the last $2,500 (0 kids) /
-# $5,000 (1+ kids) of income below that ceiling.
+# $50 minimum. Income ceiling = the current-year federal EITC maximum AGI
+# (indexed each year, e.g. $19,539.74 childless / $51,593.38 head-of-household
+# one child in 2026); the credit phases from the maximum down to $50 over the
+# last $2,500 (0 kids) / $5,000 (1+ kids) of income below that ceiling.
 - name: wa_wftc_joint_1_child_max_amount (wa)
   period: 2026
   absolute_error_margin: 0.1
@@ -79,9 +80,9 @@
   output:
     tax_units:
       tax_unit:
-        # 1-kid joint phase-out starts at (20,130 + 6,130 + 3,733/0.1598)
-        # - 5,000 = 44,620; income 20,000 is below it -> full 2026 maximum
-        # 660 x 1.02266 uprating = 674.96.
+        # Income $20,000 is well below the 2026 one-child joint phase-out
+        # start, so the credit is the full 2026 maximum: $660 (2025) x 1.02266
+        # uprating = 674.96.
         wa_working_families_tax_credit: 674.96
         adjusted_gross_income: 20_000.0
 - name: wa_wftc_childless_mid_phase_out (wa)
@@ -96,7 +97,7 @@
         is_tax_unit_dependent: false
         is_disabled: false
         immigration_status_str: CITIZEN
-        employment_income_before_lsr: 15_000
+        employment_income_before_lsr: 18_000
         capital_gains: 0
         rent: 0
         was_in_foster_care: false
@@ -126,11 +127,11 @@
   output:
     tax_units:
       tax_unit:
-        # Childless ceiling = 9,160 + 560/0.0765 = 16,480.26; phase-out
-        # starts 2,500 below at 13,980.26; rate = (342.59 - 50)/2,500 =
-        # 0.11704; 342.59 - (15,000 - 13,980.26) x 0.11704 = 223.24.
-        wa_working_families_tax_credit: 223.25
-        adjusted_gross_income: 15_000.0
+        # 2026 childless ceiling $19,539.74; phase-out starts $2,500 below at
+        # $17,039.74; rate = (342.59 - 50)/2,500 = 0.11704;
+        # 342.59 - (18,000 - 17,039.74) x 0.11704 = 230.21.
+        wa_working_families_tax_credit: 230.21
+        adjusted_gross_income: 18_000.0
 - name: wa_wftc_1_child_min_amount_near_ceiling (wa)
   period: 2026
   absolute_error_margin: 0.1
@@ -143,7 +144,7 @@
         is_tax_unit_dependent: false
         is_disabled: false
         immigration_status_str: CITIZEN
-        employment_income_before_lsr: 43_490
+        employment_income_before_lsr: 51_590
         capital_gains: 0
         rent: 0
         was_in_foster_care: false
@@ -190,12 +191,11 @@
   output:
     tax_units:
       tax_unit:
-        # 1-kid single ceiling = 20,130 + 3,733/0.1598 = 43,490.45; income
-        # 43,490 sits $0.45 below it; rate = (674.96 - 50)/5,000 = 0.12499;
-        # 674.96 - 4,999.55 x 0.12499 = 50.06 (the $50 statutory minimum
-        # region, RCW 82.08.0206(3)(c)).
-        wa_working_families_tax_credit: 50.06
-        adjusted_gross_income: 43_490.0
+        # 2026 head-of-household one-child ceiling $51,593.38; income $51,590
+        # sits just below it, in the $50 statutory minimum region
+        # (RCW 82.08.0206(3)(c)).
+        wa_working_families_tax_credit: 50.42
+        adjusted_gross_income: 51_590.0
 - name: wa_wftc_1_child_above_income_ceiling (wa)
   period: 2026
   absolute_error_margin: 0.1
@@ -208,7 +208,7 @@
         is_tax_unit_dependent: false
         is_disabled: false
         immigration_status_str: CITIZEN
-        employment_income_before_lsr: 43_495
+        employment_income_before_lsr: 51_600
         capital_gains: 0
         rent: 0
         was_in_foster_care: false
@@ -255,10 +255,11 @@
   output:
     tax_units:
       tax_unit:
-        # Income-route zero: 43,495 exceeds the 43,490.45 frozen-EITC
-        # ceiling by $4.55 -> $0 (cliff from the $50 minimum below it).
+        # Income-route zero: $51,600 exceeds the 2026 head-of-household
+        # one-child ceiling of $51,593.38 -> $0 (cliff from the $50 minimum
+        # below it).
         wa_working_families_tax_credit: 0.0
-        adjusted_gross_income: 43_495.0
+        adjusted_gross_income: 51_600.0
 - name: wa_wftc_age_18_before_2029_expansion (wa)
   period: 2026
   absolute_error_margin: 0.1
@@ -481,7 +482,7 @@
     tax_units:
       tax_unit:
         # Top child bracket: 3+ kids 2026 maximum = 1,330 x 1.02266
-        # uprating = 1,360.14; income 20,000 is below the joint 3-kid
-        # phase-out start (20,130 + 6,130 + 6,935/0.2106 - 5,000 = 54,190).
+        # uprating = 1,360.14; income 20,000 is well below the 2026 joint
+        # three-child phase-out start, so the full maximum applies.
         wa_working_families_tax_credit: 1_360.14
         adjusted_gross_income: 20_000.0

policyengine_us/variables/gov/states/wa/tax/income/credits/wa_working_families_tax_credit.py

@@ -32,6 +32,14 @@ def formula(tax_unit, period, parameters):
         # date-valued types, so the date appears here rather than in the
         # parameter tree.
         frozen_eitc = parameters.gov.irs.credits.eitc("2022-06-09")
+        # The June 9, 2022 Internal Revenue Code still contains the EITC
+        # inflation-adjustment provisions (26 U.S.C. 32(j)), so the
+        # inflation-indexed dollar amounts (the investment-income limit here,
+        # and the maximum qualifying income) track the current tax year, while
+        # the structural rules (age band, disabled-dependent waiver,
+        # separate-filer rule) stay on the frozen snapshot. Washington DOR
+        # publishes the current-year federal investment-income limit each year.
+        eitc = parameters(period).gov.irs.credits.eitc
         person = tax_unit.members
         has_tin = person("has_tin", period)
         is_head_or_spouse = person("is_tax_unit_head_or_spouse", period)
@@ -64,9 +72,9 @@ def formula(tax_unit, period, parameters):
         federal_demographic_eligible = calculate_eitc_demographic_eligibility(
             tax_unit, period, frozen_eitc, federal_child_count
         )
-        frozen_investment_income_eligible = (
+        investment_income_eligible = (
             tax_unit("eitc_relevant_investment_income", period)
-            <= frozen_eitc.phase_out.max_investment_income
+            <= eitc.phase_out.max_investment_income
         )
         earnings = tax_unit("filer_adjusted_earnings", period)
         agi = tax_unit("adjusted_gross_income", period)
@@ -85,7 +93,7 @@ def formula(tax_unit, period, parameters):
             baseline_income_eligible
             & federal_demographic_eligible
             & federal_identification_eligible
-            & frozen_investment_income_eligible
+            & investment_income_eligible
             & eitc_filing_status_eligible(
                 tax_unit,
                 period,
@@ -107,7 +115,7 @@ def formula(tax_unit, period, parameters):
             state_only_income_eligible
             & demographic_eligible
             & filer_has_tin
-            & frozen_investment_income_eligible
+            & investment_income_eligible
             & is_filer
             & takes_up_eitc
         )

policyengine_us/variables/gov/states/wa/tax/income/credits/wa_working_families_tax_credit_age_expansion_eligible.py

@@ -46,10 +46,14 @@ def formula(tax_unit, period, parameters):
         # wa_working_families_tax_credit child_count.
         # RCW 82.08.0206(2)(d) pins WFTC to the federal EITC rules as in
         # effect on June 9, 2022; this snapshot date is a statutory literal.
-        frozen_eitc = parameters.gov.irs.credits.eitc("2022-06-09")
-        frozen_investment_income_eligible = (
+        # The investment-income limit is an inflation-indexed dollar amount
+        # (26 U.S.C. 32(j), inside the pinned June 9, 2022 Code), so it tracks
+        # the current tax year -- matching Washington DOR's published limits --
+        # even though the WFTC's structural rules stay on the frozen snapshot.
+        eitc = parameters(period).gov.irs.credits.eitc
+        investment_income_eligible = (
             tax_unit("eitc_relevant_investment_income", period)
-            <= frozen_eitc.phase_out.max_investment_income
+            <= eitc.phase_out.max_investment_income
         )
         earnings = tax_unit("filer_adjusted_earnings", period)
         agi = tax_unit("adjusted_gross_income", period)
@@ -66,7 +70,7 @@ def formula(tax_unit, period, parameters):
             expansion_in_effect
             & filer_meets_min_age
             & income_eligible
-            & frozen_investment_income_eligible
+            & investment_income_eligible
             & filers_have_tin
             & is_filer
             & takes_up_eitc