Calibrate QBID against tax expenditure report (#228)

nikhilwoodruff · web-flow · commit 8db5bcc9c60b · 2025-05-13T14:29:44.000+01:00
* Calibrate QBID against tax expenditure report Fixes #226 * Add notebook in comment
diff --git a/changelog_entry.yaml b/changelog_entry.yaml
@@ -0,0 +1,4 @@
+- bump: minor
+  changes:
+    added:
+    - Calibration of the QBID tax expenditure.
diff --git a/policyengine_us_data/datasets/puf/puf.py b/policyengine_us_data/datasets/puf/puf.py
@@ -204,7 +204,9 @@ def preprocess_puf(puf: pd.DataFrame) -> pd.DataFrame:
     # Ignore cmbtp (estimate of AMT income not in AGI)
     # Ignore k1bx14s and k1bx14p (partner self-employment income included in partnership and S-corp income)
     qbi = np.maximum(0, puf.E00900 + puf.E26270 + puf.E02100 + puf.E27200)
-    W2_WAGES_SCALE = 0.16
+    # 10.1% passthrough rate for W2 wages hits the JCT tax expenditure target for QBID
+    # https://gist.github.com/nikhilwoodruff/262c80b8b17935d6fb8544647143b854
+    W2_WAGES_SCALE = 0.101
     puf["w2_wages_from_qualified_business"] = qbi * W2_WAGES_SCALE
 
     # Remove aggregate records
diff --git a/policyengine_us_data/utils/loss.py b/policyengine_us_data/utils/loss.py
@@ -394,6 +394,7 @@ def _add_tax_expenditure_targets(
         "medical_expense_deduction": 11.4e9,
         "charitable_deduction": 65.301e9,
         "interest_deduction": 24.8e9,
+        "qualified_business_income_deduction": 63.1e9,
     }
 
     def make_repeal_class(deduction_var):

Original file line number	Diff line number	Diff line change
`@@ -394,6 +394,7 @@ def _add_tax_expenditure_targets(`
`394`	`394`	`"medical_expense_deduction": 11.4e9,`
`395`	`395`	`"charitable_deduction": 65.301e9,`
`396`	`396`	`"interest_deduction": 24.8e9,`
	`397`	`+ "qualified_business_income_deduction": 63.1e9,`
`397`	`398`	`}`
`398`	`399`
`399`	`400`	`def make_repeal_class(deduction_var):`