Merge pull request #1554 from martinholmer/add-new-behavior

Add _BE_subinc_wrt_earnings Behavior parameter

docs/index.html

@@ -1024,7 +1024,7 @@ <h3 id="params-consump">Consumption Parameters</h3>
 
 <h3 id="params-behavior">Behavior Parameters</h3>
 
-<p><b>Behavior &mdash; Taxable Income</b><br><i>tc Name:</i> _BE_inc<br><i>TB Name:</i> Income elasticity of taxable income<br><i>Description:</i> Defined as dollar change in taxable income divided by dollar change in after-tax income caused by the reform.  Must be zero or negative.<br><i>Default Value:</i><br>2013: 0.0</p><p><b>Behavior &mdash; Taxable Income</b><br><i>tc Name:</i> _BE_sub<br><i>TB Name:</i> Substitution elasticity of taxable income<br><i>Description:</i> Defined as proportional change in taxable income divided by proportional change in marginal net-of-tax rate (1-MTR) on taxpayer earnings caused by the reform.  Must be zero or positive.<br><i>Default Value:</i><br>2013: 0.0</p><p><b>Behavior &mdash; Capital Gains</b><br><i>tc Name:</i> _BE_cg<br><i>TB Name:</i> Semi-elasticity of long-term capital gains<br><i>Description:</i> Defined as change in logarithm of long-term capital gains divided by change in marginal tax rate (MTR) on long-term capital gains caused by the reform.  Must be zero or negative.  Read Behavior.response documentation for discussion of appropriate values.<br><i>Default Value:</i><br>2013: 0.0</p><p><b>Response Parameter &mdash; Behavior</b><br><i>tc Name:</i> _BE_charity<br><i>Long Name:</i> Elasticity of charitable contributions<br><i>Description:</i> Defined as proportional change in cash and non-cash charitable contributions divided by proportional change in the after-tax price of charitable contributions caused by the reform. Must be zero or negative.<br><i>Default Value:</i><br>&nbsp;&nbsp; for: [AGI < 50k, 50k <= AGI < 100k, 100k <= AGI]<br>2013: [0.0, 0.0, 0.0]</p>
+<p><b>Behavior &mdash; Taxable Income</b><br><i>tc Name:</i> _BE_inc<br><i>TB Name:</i> Income elasticity of taxable income<br><i>Description:</i> Defined as dollar change in taxable income divided by dollar change in after-tax income caused by the reform.  Must be zero or negative.<br><i>Default Value:</i><br>2013: 0.0</p><p><b>Behavior &mdash; Taxable Income</b><br><i>tc Name:</i> _BE_sub<br><i>TB Name:</i> Substitution elasticity of taxable income<br><i>Description:</i> Defined as proportional change in taxable income divided by proportional change in marginal net-of-tax rate (1-MTR) on taxpayer earnings caused by the reform.  Must be zero or positive.<br><i>Default Value:</i><br>2013: 0.0</p><p><b>Behavior &mdash; Taxable Income</b><br><i>tc Name:</i> _BE_subinc_wrt_earnings<br><i>TB Name:</i> Income and substitution elasticities apply to earnings<br><i>Description:</i> False implies elasticities apply to taxable income; true implies they are both computed as proportional change in marginal net-of-tax rate (1-MTR) on taxpayer earnings caused by the reform and apply to taxpayer earnings.<br><i>Default Value:</i><br>2013: False</p><p><b>Behavior &mdash; Capital Gains</b><br><i>tc Name:</i> _BE_cg<br><i>TB Name:</i> Semi-elasticity of long-term capital gains<br><i>Description:</i> Defined as change in logarithm of long-term capital gains divided by change in marginal tax rate (MTR) on long-term capital gains caused by the reform.  Must be zero or negative.  Read Behavior.response documentation for discussion of appropriate values.<br><i>Default Value:</i><br>2013: 0.0</p><p><b>Response Parameter &mdash; Behavior</b><br><i>tc Name:</i> _BE_charity<br><i>Long Name:</i> Elasticity of charitable contributions<br><i>Description:</i> Defined as proportional change in cash and non-cash charitable contributions divided by proportional change in the after-tax price of charitable contributions caused by the reform. Must be zero or negative.<br><i>Default Value:</i><br>&nbsp;&nbsp; for: [AGI < 50k, 50k <= AGI < 100k, 100k <= AGI]<br>2013: [0.0, 0.0, 0.0]</p>
 
 <p><a href="#params">Back to Section Contents</a></p>
 

taxcalc/behavior.json

@@ -31,6 +31,22 @@
         "validations": {"min": 0.0}
     },
 
+    "_BE_subinc_wrt_earnings": {
+        "long_name": "Income and substitution elasticities apply to earnings",
+        "description": "False implies elasticities apply to taxable income; true implies they are both computed as proportional change in marginal net-of-tax rate (1-MTR) on taxpayer earnings caused by the reform and apply to taxpayer earnings.",
+        "section_1": "Behavior",
+        "section_2": "Taxable Income",
+        "notes": "",
+        "row_var": "FLPDYR",
+        "row_label": ["2013"],
+        "start_year": 2013,
+        "cpi_inflated": false,
+        "col_var": "",
+        "col_label": "",
+        "value": [false],
+        "validations": {"min": false, "max": true}
+    },
+
     "_BE_cg": {
         "long_name": "Semi-elasticity of long-term capital gains",
         "description": "Defined as change in logarithm of long-term capital gains divided by change in marginal tax rate (MTR) on long-term capital gains caused by the reform.  Must be zero or negative.  Read Behavior.response documentation for discussion of appropriate values.",

taxcalc/behavior.py

@@ -144,35 +144,49 @@ def response(calc_x, calc_y):
           Using this method, a semi-elasticity of -3.45 corresponds to a tax
           rate elasticity of -0.792.
         """
-        # pylint: disable=too-many-statements,too-many-locals
+        # pylint: disable=too-many-statements,too-many-locals,too-many-branches
         assert calc_x.records.dim == calc_y.records.dim
         assert calc_x.records.current_year == calc_y.records.current_year
         # calculate sum of substitution and income effects
         if calc_y.behavior.BE_sub == 0.0 and calc_y.behavior.BE_inc == 0.0:
             sub = np.zeros(calc_x.records.dim)
             inc = np.zeros(calc_x.records.dim)
         else:
-            # calculate marginal tax rates on wages and combined taxes
+            # calculate marginal combined tax rates on taxpayer wages+salary
             # (e00200p is taxpayer's wages+salary)
             wage_mtr_x, wage_mtr_y = Behavior._mtr_xy(calc_x, calc_y,
                                                       mtr_of='e00200p',
                                                       tax_type='combined')
-            # calculate magnitude of substitution and income effects
+            # calculate magnitude of substitution effect
             if calc_y.behavior.BE_sub == 0.0:
                 sub = np.zeros(calc_x.records.dim)
             else:
-                # proportional change in marginal net-of-tax rates on wages
-                # (c04800 is filing unit's taxable income)
+                # proportional change in marginal net-of-tax rates on earnings
                 pch = ((1. - wage_mtr_y) / (1. - wage_mtr_x)) - 1.
-                sub = calc_y.behavior.BE_sub * pch * calc_x.records.c04800
+                if calc_y.behavior.BE_subinc_wrt_earnings:
+                    # Note: e00200 is filing unit's wages+salaries
+                    sub = calc_y.behavior.BE_sub * pch * calc_x.records.e00200
+                else:
+                    # Note: c04800 is filing unit's taxable income
+                    sub = calc_y.behavior.BE_sub * pch * calc_x.records.c04800
+            # calculate magnitude of income effect
             if calc_y.behavior.BE_inc == 0.0:
                 inc = np.zeros(calc_x.records.dim)
             else:
-                # dollar change in after-tax income
-                # (combined is filing unit's income+payroll tax liability)
-                dch = calc_x.records.combined - calc_y.records.combined
-                inc = calc_y.behavior.BE_inc * dch
-        taxinc_chg = sub + inc
+                if calc_y.behavior.BE_subinc_wrt_earnings:
+                    # proportional change in after-tax income
+                    with np.errstate(invalid='ignore'):
+                        pch = np.where(calc_x.records.aftertax_income > 0.,
+                                       (calc_y.records.aftertax_income /
+                                        calc_x.records.aftertax_income) - 1.,
+                                       0.)
+                    inc = calc_y.behavior.BE_inc * pch * calc_x.records.e00200
+                else:
+                    # dollar change in after-tax income
+                    # Note: combined is f.unit's income+payroll tax liability
+                    dch = calc_x.records.combined - calc_y.records.combined
+                    inc = calc_y.behavior.BE_inc * dch
+        si_chg = sub + inc
         # calculate long-term capital-gains effect
         if calc_y.behavior.BE_cg == 0.0:
             ltcg_chg = np.zeros(calc_x.records.dim)
@@ -253,7 +267,11 @@ def response(calc_x, calc_y):
                                       nc_charity_chg)
         # Add behavioral-response changes to income sources
         calc_y_behv = copy.deepcopy(calc_y)
-        calc_y_behv = Behavior._update_ordinary_income(taxinc_chg, calc_y_behv)
+        if calc_y_behv.behavior.BE_subinc_wrt_earnings:
+            calc_y_behv.records.e00200 = calc_y_behv.records.e00200 + si_chg
+            calc_y_behv.records.e00200p = calc_y_behv.records.e00200p + si_chg
+        else:
+            calc_y_behv = Behavior._update_ordinary_income(si_chg, calc_y_behv)
         calc_y_behv = Behavior._update_cap_gain_income(ltcg_chg, calc_y_behv)
         calc_y_behv = Behavior._update_charity(c_charity_chg, nc_charity_chg,
                                                calc_y_behv)
@@ -286,7 +304,7 @@ def _validate_elasticity_values(self):
                 elif elast == '_BE_charity':
                     if val > 0.0:
                         raise ValueError(msg.format(elast, neg, year, val))
-                else:
+                elif elast != '_BE_subinc_wrt_earnings':
                     raise ValueError('illegal elasticity {}'.format(elast))
 
     @staticmethod

taxcalc/responses/economic_responses_template.json

@@ -53,6 +53,7 @@
     "behavior": {
         "_BE_inc": {"2017": [0.0]},
         "_BE_sub": {"2017": [0.0]},
+        "_BE_subinc_wrt_earnings": {"2017": [false]},
         "_BE_cg": {"2017": [0.0]},
         "_BE_charity": {"2017": [[0.0, 0.0, 0.0]]}
     },

taxcalc/tests/test_behavior.py

@@ -48,12 +48,14 @@ def test_behavioral_response_Calculator(cps_subsample):
                         '_BE_charity': [[0.0, 0.0, 0.0]]}}
     behavior_y.update_behavior(behavior0)
     calc_y_behavior0 = Behavior.response(calc_x, calc_y)
-    behavior1 = {year: {'_BE_sub': [0.3], '_BE_cg': [0.0]}}
+    behavior1 = {year: {'_BE_sub': [0.3], '_BE_inc': [-0.1], '_BE_cg': [0.0],
+                        '_BE_subinc_wrt_earnings': [True]}}
     behavior_y.update_behavior(behavior1)
     assert behavior_y.has_response() is True
-    assert behavior_y.BE_sub == 0.3
-    assert behavior_y.BE_inc == 0.0
-    assert behavior_y.BE_cg == 0.0
+    epsilon = 1e-9
+    assert abs(behavior_y.BE_sub - 0.3) < epsilon
+    assert abs(behavior_y.BE_inc - -0.1) < epsilon
+    assert abs(behavior_y.BE_cg - 0.0) < epsilon
     calc_y_behavior1 = Behavior.response(calc_x, calc_y)
     behavior2 = {year: {'_BE_sub': [0.5], '_BE_cg': [-0.8]}}
     behavior_y.update_behavior(behavior2)