Count the premium tax credit in household net income as a refundable credit

changelog.d/ptc-refundable-credit-net-income.changed.md

@@ -0,0 +1 @@
+Count the federal premium tax credit in household net income and household tax as a refundable tax credit (household_refundable_tax_credits), whether or not health benefits count in net income, so changes to it reach net income and the budget. income_tax and SPM resources are unchanged.

policyengine_us/parameters/gov/household/household_health_benefits.yaml

@@ -4,7 +4,8 @@ values:
     - medicaid_cost
     - msp_cost
     - chip
-    - assigned_aca_ptc
+    # The federal premium tax credit counts as a refundable tax credit
+    # (household_refundable_tax_credits) whether or not health benefits do.
     - assigned_ca_premium_subsidy
     - basic_health_program
     - co_omnisalud

policyengine_us/parameters/gov/household/household_health_costs.yaml

@@ -2,7 +2,10 @@ description: The government counts these sources as household health out-of-pock
 values:
   2022-01-01:
     - chip_premium
-    - marketplace_net_premium
+    # The whole premium: household net income counts the premium tax credit
+    # that pays part of it as a refundable credit, so the net premium would
+    # count the credit twice.
+    - selected_marketplace_plan_premium_proxy
 
 metadata:
   unit: list

policyengine_us/tests/core/test_behavioral_response_measurements.py

@@ -649,7 +649,8 @@ def test_semi_elasticity_capital_gains_response_end_to_end_from_a_zero_rate():
     """The semi-elasticity form through the model, from a 0% baseline rate.
 
     A Texas filer whose $30,000 of gains sit in the 0% bracket faces a new 10%
-    rate there. The semi-elasticity response depends only on the change in the
+    rate there. The filer has employer coverage, so no premium tax credit
+    phases out with the gains. The semi-elasticity response depends only on the change in the
     measured rate, so it is about 29% at 3.4, where the log-rate form's 0.001
     floor would remove about 96% (test_capital_gains_response_forms.py covers
     the forms' arithmetic without a simulation).
@@ -659,7 +660,13 @@ def test_semi_elasticity_capital_gains_response_end_to_end_from_a_zero_rate():
     year = "2026"
     gains = 30_000
     situation = {
-        "people": {"p": {"age": {year: 50}, "long_term_capital_gains": {year: gains}}},
+        "people": {
+            "p": {
+                "age": {year: 50},
+                "long_term_capital_gains": {year: gains},
+                "has_esi": {year: True},
+            }
+        },
         "tax_units": {"tu": {"members": ["p"]}},
         "families": {"f": {"members": ["p"]}},
         "spm_units": {"s": {"members": ["p"]}},

policyengine_us/tests/core/test_estate_income_invariants.py

@@ -480,14 +480,16 @@ def test_estate_income_raises_household_net_income_by_its_after_tax_amount(
     A single Texas filer with $50,000 of wages in 2024 receives $10,000 of
     estate income, which stays in the 12% bracket. Texas has no income tax
     and estate income carries no payroll tax, so household net income rises
-    by the $10,000 less the federal income tax increase.
+    by the $10,000 less the federal income tax increase. The filer has
+    employer coverage, so no premium tax credit falls as income rises.
     """
 
     def net_income(estate):
         head = {
             "age": {2024: 40},
             "employment_income": {2024: 50_000},
             "estate_income": {2024: estate},
+            "has_esi": {2024: True},
         }
         if qualified is not None:
             head["estate_income_would_be_qualified"] = {2024: qualified}

policyengine_us/tests/core/test_marginal_tax_rate_coverage.py

@@ -179,6 +179,7 @@ def test_raising_the_cap_only_adds_people(mtr_by_cap, variable):
 # wages less the $14,600 standard deduction ($75,400, $45,400, $15,400), so a
 # $1,000 raise is taxed at 22%, 12% and 12%, plus 7.65% employee payroll tax.
 # Nobody crosses a bracket or payroll threshold, and Texas has no income tax.
+# Each has employer coverage, so no premium tax credit phases out with a raise.
 ROOMMATE_WAGES = (90_000, 60_000, 30_000)
 ROOMMATE_RATES = {
     "marginal_tax_rate": (0.2965, 0.1965, 0.1965),
@@ -193,7 +194,11 @@ def test_roommates_match_hand_computed_rates(cap):
     names = [f"roommate{i}" for i in range(len(ROOMMATE_WAGES))]
     situation = {
         "people": {
-            name: {"age": {YEAR: 40 - 5 * i}, "employment_income": {YEAR: wages}}
+            name: {
+                "age": {YEAR: 40 - 5 * i},
+                "employment_income": {YEAR: wages},
+                "has_esi": {YEAR: True},
+            }
             for i, (name, wages) in enumerate(zip(names, ROOMMATE_WAGES))
         },
         "tax_units": {f"{name}_tax_unit": {"members": [name]} for name in names},

policyengine_us/tests/policy/baseline/gov/irs/income/taxable_income/adjusted_gross_income/irs_gross_income/military_retirement_pay.yaml

@@ -7,6 +7,7 @@
 
 - name: Case 1, Military retirement pay flows into federal gross income, AGI, and taxable income.
   period: 2024
+  absolute_error_margin: 0.01
   input:
     people:
       person1:
@@ -28,7 +29,10 @@
     household_market_income: 30_000
     snap_unearned_income: 30_000
     ssi_unearned_income: 30_000
-    household_net_income: 28_384
+    # With no other coverage, a 2024 marketplace credit under the enhanced
+    # schedule, which household net income counts as a refundable credit.
+    premium_tax_credit_in_force: 10_323.72
+    household_net_income: 28_384 + 10_323.72
 
 - name: Case 2, Military retirement pay survivors flows into federal gross income, AGI, and taxable income.
   period: 2024
@@ -56,6 +60,7 @@
 
 - name: Case 3, Military retirement pay adds with employment income.
   period: 2024
+  absolute_error_margin: 0.01
   input:
     people:
       person1:
@@ -77,7 +82,10 @@
     taxable_income: 70_000 - 14_600
     market_income: 70_000
     household_market_income: 70_000
-    household_net_income: 59_699
+    # The enhanced schedule's credit above 400% FPL: the benchmark premium
+    # minus 8.5% of income.
+    premium_tax_credit_in_force: 2_846.77
+    household_net_income: 59_699 + 2_846.77
 
 - name: Case 4, Dependent military retirement pay is excluded from the tax unit filer gross income.
   period: 2024

policyengine_us/tests/policy/baseline/gov/local/tax/local_tax_rollup.yaml

@@ -91,6 +91,7 @@
 
 - name: Indiana county tax flows from earnings to household and SPM totals
   period: 2021
+  absolute_error_margin: 0.01
   input:
     state_code: IN
     county_str: BOONE_COUNTY_IN
@@ -101,8 +102,10 @@
     local_income_tax: 735
     local_income_tax_before_refundable_credits: 735
     local_tax: 735
-    household_tax: 9_037.7
-    household_net_income: 40_962.3
+    # The 2021 premium tax credit lowers household tax, not the SPM's taxes.
+    premium_tax_credit_in_force: 1_275.24
+    household_tax: 9_037.7 - 1_275.24
+    household_net_income: 40_962.3 + 1_275.24
     spm_unit_local_tax: 735
     spm_unit_taxes: 9_037.7
     spm_unit_net_income: 36_824.8

policyengine_us/tests/policy/baseline/gov/states/mt/tax/income/integration.yaml

@@ -698,14 +698,18 @@
     # 2,339.51 - 1,250 = 1,089.51.
     state_income_tax: 1_089.51
     household_refundable_state_tax_credits: 1_250
-    # Federal 2021 recovery rebate credit 1,400 + MT rebate 1,250 = 2,650.
-    household_refundable_tax_credits: 2_650
+    # With no other coverage, a 2021 marketplace credit under the enhanced
+    # schedule.
+    premium_tax_credit_in_force: 2_272.79
+    # Federal 2021 recovery rebate credit 1,400 + MT rebate 1,250 + premium
+    # tax credit 2,272.79 = 4,922.79.
+    household_refundable_tax_credits: 4_922.79
     # Federal income tax 4,295 (TI = 50,000 - 12,550 = 37,450;
     # 10% x 9,950 + 12% x 27,500 = 995 + 3,300) + employee payroll tax
     # 3,825 (7.65% x 50,000) + MT line 20 2,339.51 = 10,459.51.
     household_tax_before_refundable_credits: 10_459.51
-    # 50,000 + 2,650 - 10,459.51 = 42,190.49 (40,940.49 without the rebate).
-    household_net_income: 42_190.49
+    # 50,000 + 4,922.79 - 10,459.51 = 44,463.28 (43,213.28 without the rebate).
+    household_net_income: 44_463.28
     # SPM resources rise by the same 1,250 through spm_unit_state_tax:
     # 36,802.99 without the rebate + 1,250 = 38,052.99.
     spm_unit_net_income: 38_052.99
@@ -744,14 +748,19 @@
     # 2,518.22 - 2,500 = 18.22.
     state_income_tax: 18.22
     household_refundable_state_tax_credits: 2_500
-    # Federal 2021 recovery rebate credit 2 x 1,400 + MT rebate 2,500 = 5,300.
-    household_refundable_tax_credits: 5_300
+    # With no other coverage, a 2021 marketplace credit for both under the
+    # enhanced schedule.
+    premium_tax_credit_in_force: 8_500.58
+    # Federal 2021 recovery rebate credit 2 x 1,400 + MT rebate 2,500 +
+    # premium tax credit 8,500.58 = 13,800.58.
+    household_refundable_tax_credits: 13_800.58
     # Federal income tax 3,790 (TI = 60,000 - 25,100 = 34,900;
     # 10% x 19,900 + 12% x 15,000 = 1,990 + 1,800) + employee payroll tax
     # 4,590 (7.65% x 60,000) + MT line 20 2,518.22 = 10,898.22.
     household_tax_before_refundable_credits: 10_898.22
-    # 60,000 + 5,300 - 10,898.22 = 54,401.78 (51,901.78 without the rebate).
-    household_net_income: 54_401.78
+    # 60,000 + 13,800.58 - 10,898.22 = 62,902.36 (60,402.36 without the
+    # rebate).
+    household_net_income: 62_902.36
     # SPM resources rise by the same 2,500 through spm_unit_state_tax:
     # 47,581.78 without the rebate + 2,500 = 50,081.78.
     spm_unit_net_income: 50_081.78

policyengine_us/tests/policy/baseline/household/household_health_benefits.yaml

@@ -12,7 +12,7 @@
     household_health_benefits: 0
     household_benefits: 0
 
-- name: Case 2, flag on includes annual canonical ACA PTC and Medicaid value.
+- name: Case 2, flag on includes the Medicaid value; the ACA PTC counts as a refundable tax credit instead.
   period: 2026
   absolute_error_margin: 0.01
   input:
@@ -21,8 +21,8 @@
     medicaid_cost: 500
     snap: 0
   output:
-    household_health_benefits: 1_500
-    household_benefits: 1_500
+    household_health_benefits: 500
+    household_benefits: 500
 
 - name: Case 3, flag on includes annual MSP and CHIP values.
   period: 2026
@@ -35,8 +35,8 @@
     chip: 300
     snap: 0
   output:
-    household_health_benefits: 4_234.8
-    household_benefits: 4_234.8
+    household_health_benefits: 3_234.8
+    household_benefits: 3_234.8
 
 - name: Case 4, legacy wrappers do not double count canonical health values.
   period: 2026
@@ -52,8 +52,8 @@
     msp_cost: 2_434.8
     snap: 0
   output:
-    household_health_benefits: 4_234.8
-    household_benefits: 4_234.8
+    household_health_benefits: 3_234.8
+    household_benefits: 3_234.8
 
 - name: Case 5, flag on includes forced Maryland Premium Assistance value.
   # md_premium_assistance is registered in the household_health_benefits list

policyengine_us/tests/policy/baseline/household/household_net_income_including_health_benefits.yaml

@@ -21,3 +21,12 @@
     healthcare_benefit_value: 2_000
   output:
     household_net_income_including_health_benefits: 4_000
+
+- name: The premium tax credit, in both net income and health benefits, counts once
+  period: 2026
+  input:
+    household_net_income: 3_000
+    healthcare_benefit_value: 1_500
+    premium_tax_credit_in_force: 1_000
+  output:
+    household_net_income_including_health_benefits: 3_000 + 1_500 - 1_000

policyengine_us/tests/policy/baseline/household/income/household/household_health_costs.yaml

@@ -14,16 +14,27 @@
   output:
     household_health_costs: 360
 
-- name: Household health costs include Marketplace net premium when health benefits are included in net income.
+- name: Household health costs include the whole Marketplace premium when health benefits are included in net income.
   period: 2024
   input:
     gov.simulation.include_health_benefits_in_net_income: true
     chip_premium: 360
-    marketplace_net_premium: 2_000
+    selected_marketplace_plan_premium_proxy: 2_000
   output:
     household_health_costs: 2_360
 
-- name: Household health costs include computed unsubsidized Marketplace net premium.
+- name: The premium tax credit doesn't lower household health costs, since net income counts it as a refundable credit.
+  period: 2026
+  input:
+    gov.simulation.include_health_benefits_in_net_income: true
+    chip_premium: 0
+    selected_marketplace_plan_premium_proxy: 5_000
+    aca_ptc: 1_000
+  output:
+    marketplace_net_premium: 4_000
+    household_health_costs: 5_000
+
+- name: Household health costs include a computed unsubsidized Marketplace premium.
   absolute_error_margin: 0.01
   period: 2026
   input:

policyengine_us/tests/policy/baseline/household/income/household/household_net_income.yaml

@@ -184,3 +184,104 @@
   output:
     spm_unit_net_income: 500_000 + 1_000 + 200
     household_net_income: 500_000 + 1_000 + 200
+
+- name: Household net income counts the premium tax credit as a refundable tax credit.
+  period: 2026
+  input:
+    household_market_income: 30_000
+    household_benefits: 0
+    income_tax_refundable_credits_in_force: 0
+    household_refundable_state_tax_credits: 0
+    household_refundable_local_tax_credits: 0
+    used_aca_ptc: 4_000
+    household_tax_before_refundable_credits: 2_000
+    household_health_costs: 0
+  output:
+    household_tax: 2_000 - 4_000
+    household_net_income: 30_000 + 4_000 - 2_000
+
+# With health benefits counted, health costs subtract the whole Marketplace
+# premium, so a credit that is $1,000 larger raises net income by $1,000, not
+# $2,000 (once as a refundable credit and again through a smaller net premium).
+- name: With health benefits counted, a $1,000 premium tax credit against a $5,000 premium.
+  period: 2026
+  input:
+    gov.simulation.include_health_benefits_in_net_income: true
+    household_market_income: 30_000
+    household_benefits: 0
+    income_tax_refundable_credits_in_force: 0
+    household_refundable_state_tax_credits: 0
+    household_refundable_local_tax_credits: 0
+    household_tax_before_refundable_credits: 2_000
+    chip_premium: 0
+    selected_marketplace_plan_premium_proxy: 5_000
+    aca_ptc: 1_000
+  output:
+    premium_tax_credit_in_force: 1_000
+    household_health_costs: 5_000
+    household_net_income: 30_000 + 1_000 - 2_000 - 5_000
+
+- name: With health benefits counted, a $2,000 premium tax credit against the same premium.
+  period: 2026
+  input:
+    gov.simulation.include_health_benefits_in_net_income: true
+    household_market_income: 30_000
+    household_benefits: 0
+    income_tax_refundable_credits_in_force: 0
+    household_refundable_state_tax_credits: 0
+    household_refundable_local_tax_credits: 0
+    household_tax_before_refundable_credits: 2_000
+    chip_premium: 0
+    selected_marketplace_plan_premium_proxy: 5_000
+    aca_ptc: 2_000
+  output:
+    premium_tax_credit_in_force: 2_000
+    household_health_costs: 5_000
+    household_net_income: 30_000 + 2_000 - 2_000 - 5_000
+
+# A single Texas adult aged 40 in 2025 (the 2017 cliffs analysis household,
+# PolicyEngine/us-cliffs-2017 scripts/ptc_household.py), with health benefits
+# counted. A $1,000 raise cuts the premium tax credit by $94, and net income
+# rises by $709.50 with or without health benefits counted (31,840.09 to
+# 32,549.59 without): the cut counts once.
+- name: With health benefits counted, a Texas adult earning $30,000 in 2025.
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    gov.simulation.include_health_benefits_in_net_income: true
+    people:
+      person1:
+        age: 40
+        employment_income: 30_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+    households:
+      household:
+        members: [person1]
+        state_code: TX
+  output:
+    premium_tax_credit_in_force: 5_606.58
+    household_health_costs: 6_194.58
+    household_net_income: 25_645.50
+
+- name: With health benefits counted, the same adult earning $31,000.
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    gov.simulation.include_health_benefits_in_net_income: true
+    people:
+      person1:
+        age: 40
+        employment_income: 31_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+    households:
+      household:
+        members: [person1]
+        state_code: TX
+  output:
+    premium_tax_credit_in_force: 5_512.58
+    household_health_costs: 6_194.58
+    household_net_income: 25_645.50 + 709.50