Model RI Governor Dan McKee's 2027 Tax Proposals

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Summary

Implements Rhode Island Governor Dan McKee's proposed tax changes for 2027, as outlined in issue #7194.

Proposals to Implement

1. Rhode Island Child Tax Credit (§44-30-104) - New refundable child tax credit of $500 per child under 6, phasing out for higher incomes

2. Social Security Exemption Expansion (§44-30-12(c)(8)) - Increase income threshold for full Social Security exemption from $107,950 to $150,000 (single) and $200,000 (joint)

3. New Top Income Tax Bracket (§44-30-2.6(c)(3)(A)) - Add a 6.5% bracket for taxable income exceeding $500,000

4. Pension/Annuity Exemption Updates (§44-30-12(c)(9)) - Increase exemption amount from $20,000 to $30,000 and raise income threshold from $107,950 to $150,000 (single) and $200,000 (joint)

Closes #7194

Test plan

• Add unit tests for RI Child Tax Credit calculation and phase-out
• Add unit tests for Social Security exemption with new thresholds
• Add unit tests for new top income tax bracket
• Add unit tests for pension/annuity exemption updates
• Run microsimulation tests to verify integration

🤖 Generated with Claude Code

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Updates Made

Fixed and enhanced the implementation based on legislative text review:

High Earner Tax (§44-30-2.6(c)(3)(A))

• Fixed: Now implements complete new bracket structure for 2027+ instead of just adding an additional tax
• Brackets: $0-$55k (3.75%), $55k-$125k (4.75%), $125k-$648k (5.99%), $648k+ (8.99%)
• Uses fixed thresholds as specified in the proposal rather than uprated baseline thresholds

Child Tax Credit (§44-30-104)

• Fixed: Age limit changed from 18 to 19 so 18-year-olds qualify ("18 years of age or under")
• Updated to use stepped phaseout mechanism per legislative formula

Social Security Exemption (§44-30-12(c)(8))

• Fixed: Changed income_limit_applies parameter logic to be a "repeal" flag
• true = income limit repealed (universal exemption), defaults to false since not law yet

Test Results

All 18 RI contrib tests pass with correct expected values per the legislative text.

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Review Changes

After reviewing the implementation against the legislation:

Removed

• Pension/Annuity Exemption Reform - Removed as the changes are minor (existing law already has $50k cap for 2025+, only income limits change slightly)

Kept (3 reforms)

1. Child Tax Credit - $320 per child with stepped phaseout
2. High Earner Tax Bracket - New 8.99% rate above $648,398
3. Social Security Exemption Expansion - Age requirement removed (2027), higher thresholds (2028), universal (2029+)

Technical Changes

• Consolidated social security income limit parameters into single file with filing status breakdown
• Verified inflation adjustments match legislation (income thresholds are indexed, caps are not)

[PavelMakarchuk]

Some structural questions

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@PavelMakarchuk Addressed your review comments:

Social Security Exemption Reform:

• Refactored to use vectorized where() statements instead of if/else loops
• reform_age_eligible computed via where(p_reform.age_requirement_applies, ...)
• reform_eligible computed via where(p_reform.income_limit_applies, ...)
• Final return uses where(p_reform.in_effect, reform_eligible, baseline_eligible)

High Earner Tax Reform:

• Replaced hardcoded thresholds/rates with a parameterized brackets.yaml file using marginal_rate type
• Now uses p_reform.brackets.calc(income) for tax calculation
• Removed separate rate.yaml and threshold.yaml files in favor of unified brackets parameter

All tests pass.