DE income tax difference with TAXSIM35

[martinholmer]

The following integration test fails. It is not yet known whether the
tax logic problem is in TAXSIM35 or in the current PEUS code, or
whether there are problems in both models. This topic is meant to
facilitate discussion of why this test fails, primarily by reporting
the results of hand calculations required to fill out the relevant tax
form.

- name: Tax unit with taxsimid 6600 in k21.its.csv and k21.ots.csv
  absolute_error_margin: 0.01
  period: 2021
  input:
    people:
      person1:
        age: 73
        employment_income: 20010
        qualified_dividend_income: 1005.0
        taxable_interest_income: 5505.0
        short_term_capital_gains: 2005.0
        long_term_capital_gains: 4005.0
        rental_income: 505.0
        taxable_private_pension_income: 3000.0
        social_security_retirement: 6000.0
        real_estate_taxes: 1000
        mortgage_interest: 31000
        self_employment_income: 137010
        business_is_qualified: true
        business_is_sstb: false
        w2_wages_from_qualified_business: 100e6
        ssi: 0  # not in TAXSIM35
        state_supplement: 0  # not in TAXSIM35
        wic: 0  # not in TAXSIM35
        ma_covid_19_essential_employee_premium_pay_program: 0  # not in TAXSIM35
      person2:
        age: 73
        employment_income: 12010
        qualified_dividend_income: 1005.0
        taxable_interest_income: 5505.0
        short_term_capital_gains: 2005.0
        long_term_capital_gains: 4005.0
        rental_income: 505.0
        taxable_private_pension_income: 3000.0
        social_security_retirement: 6000.0
        ssi: 0  # not in TAXSIM35
        state_supplement: 0  # not in TAXSIM35
        wic: 0  # not in TAXSIM35
        ma_covid_19_essential_employee_premium_pay_program: 0  # not in TAXSIM35
    tax_units:
      tax_unit:
        members: [person1, person2]
        local_income_tax: 0  # not in TAXSIM35
        state_sales_tax: 0  # not in TAXSIM35
        ca_use_tax: 0  # not in TAXSIM35
        il_use_tax: 0  # not in TAXSIM35
        nm_2021_income_rebate: 0  # not in TAXSIM35
        nm_additional_2021_income_rebate: 0  # not in TAXSIM35
        nm_supplemental_2021_income_rebate: 0  # not in TAXSIM35
        ny_supplemental_eitc: 0  # not in TAXSIM35
        ok_use_tax: 0  # not in TAXSIM35
        pa_use_tax: 0  # not in TAXSIM35
        vt_renter_credit: 0  # not in TAXSIM35
    spm_units:
      spm_unit:
        members: [person1, person2]
        snap: 0  # not in TAXSIM35
        tanf: 0  # not in TAXSIM35
    households:
      household:
        members: [person1, person2]
        state_fips: 10  # DE
  output:  # expected results from patched TAXSIM35 2024-04-09 version
    de_income_tax: 7429.24

[PavelMakarchuk]

@martinholmer I have adjusted the deductions logic in #4365 but it still seems like there is a dif. from TAXSIM to PE. TAXSIM seems to apply the non-refundable credits to the _joint income tax amount while this is the output of the terminal:

The output of the integration test seems to take the joint tax amount and apply the non-refundable credits.

Any thoughts what is happening here?

[martinholmer]

@PavelMakarchuk asked in discussion topic #4358:

Any thoughts what is happening here?

No. You haven't explained what the cause of the DE income tax diff is in the #4358 test case. What is it?

[PavelMakarchuk]

@martinholmer I believe the diff in income tax comes from the fact that the tax rate is applied to the joint taxable income as opposed to the separate amount:

Joint and separate taxable income: $ 134,632 ($122,080 and $12,552 separately) PE and TAXSIM align

Income tax before credits joint: $7,869

Income tax before credits separate: $7,040 and $383 ($7,424 total)

Non refundable credits: $440 (PE and TAXSIM align)

Outputs:
PE: $6,984 (separate income tax - credits)

TAXSIM: $7429 (joint income tax - credits)

To us, the structure of the form suggests that we should be calculating the rates separately:

We have looked through the instructions but couldn't find anything, let me know if there is anything we missed

[martinholmer]

In discussion topic #4358, @PavelMakarchuk said:

I believe the diff in income tax comes from the fact that the tax rate is applied to the joint taxable income as opposed to the separate amount:

I don't see how that could be the case given that there are no PEUS-vs-TAXSIM tax differences for all the samples without itemized deduction expenses.

I'm going to close this topic and test the 0.729.1 version now that issue #4362 has been fixed.