Tell me: What is the correct withholding for an individual who claims dependent credits (line 3) and/or deductions (line 4(b)) equal or greater than they expect in total income?
The math says that number is zero. Any number other than "zero" is not the correct withholding. There is no legal or mathematical justification for any other number: The correct withholding is "zero".
The confusion arises from what "exempt status" actually means. If you read the instructions on the W4, you'll find that what it actually means is that you are not disclosing your dependent credits and deductions via W4. You complete only steps 1(a) (your Name); 1(b) (your social security number) and 5 (signature and date). You write "exempt" under line 4(c) and provide no further information. You are not informing your employer or the IRS why there should be zero withholding; you are only informing them that you are exempt from withholding.
In this hypothetical, I'm not claiming exempt status. I don't qualify to claim it, because I had a tax liability last year. That does not mean that some entirely arbitrary amount of money must be withheld for taxes I don't actually owe. It means that I must actually disclose that I intend to claim credits and deductions exceeding my total income.
From the W4 instructions:
Exemption from withholding. You may claim exemption from
withholding for 2025 if you meet both of the following
conditions: you had no federal income tax liability in 2024 and
you expect to have no federal income tax liability in 2025. You
had no federal income tax liability in 2024 if (1) your total tax on
line 24 on your 2024 Form 1040 or 1040-SR is zero (or less than
the sum of lines 27, 28, and 29), or (2) you were not required to
file a return because your income was below the filing threshold
for your correct filing status. If you claim exemption, you will
have no income tax withheld from your paycheck and may owe
taxes and penalties when you file your 2025 tax return. To claim
exemption from withholding, certify that you meet both of the
conditions above by writing “Exempt” on Form W-4 in the space
below Step 4(c). Then, complete Steps 1(a), 1(b), and 5. Do not
complete any other steps.