feenberg
commented
8 years ago On Sun, 13 Dec 2015, Martin Holmer wrote:
The testmtr.py program was recently added to the Tax-Calculator repository. This program simply computes 2013 marginal tax rates (mtr) with respect to each income type for records in the puf.csv file and then summarizes those mtr into two histograms (one for FICA and one for income taxes) for each income type. The top edge of the highest mtr histogram bin is 1.0 (that is, a 100 percent marginal tax rate). This issue identifies which puf.csv records have mtr values above 1.0 (or 100 percent).
Before pull request #484 was merged into the master branch, there was only one puf.csv record (out of 219,814) that had mtr above one: recid 126452, which had a mtr with respect to interest income of 12612.69 and also had a mtr with respect to long-term capital gains of 12612.69. Here is this record's 2013 Tax-Calculator output (in Internet-TAXSIM format) where the mtr is computed with respect to long-term capital gains (rather than taxpayer earnings):
cp ../tax-calculator-data/puf.csv . python inctax.py --blowup --mtrinc e23250 puf.csv 2013 You loaded data for 2009. Your data have been extrapolated to 2013. awk '$1==126452' puf-13.out-inctax
- 2013 0 433.87 0.00 0.00 1261268.73 0.00 0.00 18027.30 0.00 0.00 0.00 19500.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1000.00 0.00 126.13 18027.30 0.00 0.00
Notice that output variable 25 (EITC) is $126.13 before the one-cent is added to long-term capital gains. The EITC has an unearned income eligibility limit, beyond which all EITC payments are lost. The extra one-cent of long-term capital gains apparently pushed this record over that limit causing a complete loss in EITC payments. So, the mtr would be 126.13/0.01, which equals 12613, which is within rounding error of the 12612.6873 calculated by Tax-Calculator. This inference is supported by the fact that this record has the exact same mtr with respect to taxable interest income, e00300.
So, in summary, the very high marginal tax rates calculated for recid 126452 are accurate representations of how the income tax works under current law.
After pull request #484 was merged into the master branch, there are now nine additional records who have a marginal tax rate with respect to long-term capital gains (ltcg) above one or 100 percent, but none of them receive an EITC payment before the one cent is added to ltcg. There are no very high mtr with respect to other income types (except for the one for recid 126452 discussed above). Here are those nine records:
awk '$7>100&&$25==0{printf("%.2f\t%d\n",$7/100,$1);n++}END{print n}' puf-13.out-inct ax 2779750.00 322958 13285000.19 295708 12612.69 126452 34248.95 48609 77609.22 341136 2142221.71 296832 31175.26 338146 102975.26 205040 730419.94 234412 723720.15 363198 9
The first column above contains the decimal mtr and the second column contains the recid.
I looked briefly at some of the puf.csv input variables for these nine records and the only things that I noticed that the nine have in common are: (a) they all have Schedule E income, (b) none of them have tax-exempt interest income, (c) and they all have positive long-term capital gains.
I don't have enough familiarity with how the income tax code works to know whether or not it contains rules (other than the EITC unearned income eligibility limit mentioned above) that would generate these very high marginal tax rates on long-term capital gains. If there are not other rules that generate notches in income tax liability, then pull request #484 may have introduced one or more bugs into the Tax-Calculator.
The income tax code for Schedule D is so complicated, no one involved with the project will be sufficiently familiar to see the problem by looking at the data. The way we deal with problems like this is to get a Schedule D and file it out line by line, comparing the results with the C-values in from the calculator. Usually it becomes clear where the error is. If you send me the 22 variables of input and the C values calculated I can do this today.
A tax rate of 13 million percent implies a change in tax of 130,000 - which should show up on the Schedule D quite clearly!
dan
The only thing that seems certain to me is that the income tax calculations for these nine records need to be checked. If the checking finds these mtr are legitimate, then the features of the tax code that generate these notches need to be documented. If the checking finds logic flaws, the bugs need to be eliminated.
cc @MattHJensen @feenberg @GoFroggyRun @Amy-Xu @jdebacker
— Reply to this email directly or view it on GitHub.[AHvQVTUy0yr9HqYyr5ZR9oqG59-1AjOBks5pPeOugaJpZM4G0ZtU.gif]
Amy-Xu
martinholmer
GoFroggyRun
MattHJensen
The
testmtr.pyprogram was recently added to the Tax-Calculator repository. This program simply computes 2013 marginal tax rates (mtr) with respect to each income type for records in thepuf.csvfile and then summarizes those mtr into two histograms (one for FICA and one for income taxes) for each income type. The top edge of the highest mtr histogram bin is 1.0 (that is, a 100 percent marginal tax rate). This issue identifies whichpuf.csvrecords have mtr values above 1.0 (or 100 percent).Before pull request #484 was merged into the master branch, there was only one
puf.csvrecord (out of 219,814) that had mtr above one: recid 126452, which had a mtr with respect to interest income of 12612.69 and also had a mtr with respect to long-term capital gains of 12612.69. Here is this record's 2013 Tax-Calculator output (in Internet-TAXSIM format) where the mtr is computed with respect to long-term capital gains (rather than taxpayer earnings):Notice that output variable 25 (EITC) is $126.13 before the one cent is added to long-term capital gains. The EITC has an unearned income eligibility limit, beyond which all EITC payments are lost. The extra one cent of long-term capital gains apparently pushed this record over that limit causing a complete loss in EITC payments. So, the mtr would be 126.13/0.01, which equals 12613, which is within rounding error of the 12612.6873 calculated by Tax-Calculator. This inference is supported by the fact that this record has the exact same mtr with respect to taxable interest income, e00300.
So, in summary, the very high marginal tax rates calculated for recid 126452 are accurate representations of how the income tax works under current law.
After pull request #484 was merged into the master branch, there are now nine additional records who have a marginal tax rate with respect to long-term capital gains (ltcg) above one or 100 percent, but none of them receive an EITC payment before the one cent is added to ltcg. There are no very high mtr with respect to other income types (except for the one for recid 126452 discussed above). Here are those nine records:
The first column above contains the decimal mtr and the second column contains the recid.
I looked briefly at some of the
puf.csvinput variables for these nine records and the only things that I noticed that the nine have in common are: (a) they all have Schedule E income, (b) none of them have tax-exempt interest income, (c) and they all have positive long-term capital gains.I don't have enough familiarity with how the income tax code works to know whether or not it contains rules (other than the EITC unearned income eligibility limit mentioned above) that would generate these very high marginal tax rates on long-term capital gains. If there are not other rules that generate notches in income tax liability, then pull request #484 may have introduced one or more bugs into the Tax-Calculator.
The only thing that seems certain to me is that the income tax calculations for these nine records need to be checked. If the checking finds these mtr are legitimate, then the features of the tax code that generate these notches need to be documented. If the checking finds logic flaws, the bugs need to be eliminated.
cc @MattHJensen @feenberg @GoFroggyRun @Amy-Xu @jdebacker