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Author: Maag, Elaine

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An Analysis of Marco Rubio's Tax Plan (Research Brief)
Elaine MaagJim NunnsJeff RohalyRoberton Williams

Marco Rubio’s tax proposal would convert the federal income tax into a consumption tax by not taxing investment income of individuals and by converting the corporate income tax into a cash-flow consumption tax. It would replace most deductions and exemptions with a universal credit; eliminate estate taxes, the AMT, and all ACA taxes; and move the US to a territorial tax system. A new $2,500 child credit would aid families with children. Taxes would fall at all income levels, with high-income households benefiting the most. Revenues would decline by $6.8 trillion over a decade (assuming no change in economic growth).

Published: 02/11/16
Availability:   PDF


Reforming the Child Tax Credit: How Different Proposals Change Who Benefits (Research Brief)
Elaine Maag

The federal child tax credit provides a credit of up to $1,000 per child under age 17; the refundable portion of the credit, which is crucial for low-income families, is limited to 15 percent of earnings above a defined threshold. That threshold is set to increase from $3,000 to almost $15,000 after 2017, which will dramatically reduce benefits for the lowest income families and eliminate benefits entirely for almost half of workers in the lowest fifth of the income distribution who have children. This brief analyzes the impact of extending current rules beyond 2017 along with other reforms that tend to benefit higher-income families.

Published: 12/09/15
Availability:   PDF


Using Supplemental Nutrition Assistance Program Data in Earned Income Tax Credit Administration: A Case Study of Florida SNAP Data Linked to IRS Tax Return Data (Research Report)
Elaine MaagMike PergamitDevlin HansonCaroline RatcliffeSara EdelsteinSarah Minton

The earned income tax credit (EITC) is the most effective antipoverty program targeted to working-age households, delivering $60 billion annually. Critics note a relatively high error rate – with errors often stemming from complicated rules about who counts as a “qualifying child”. We analyze data from the Florida Supplemental Nutrition Assistance Program (SNAP) to see if it could be useful in EITC program administration. We found that, except in limited circumstances, the information reported to SNAP is not detailed enough and not of high enough quality to conclusively verify eligibility. Congress could improve EITC administration by simplifying the qualifying child rules.

Published: 10/02/15
Availability:   PDF


The Financial Consequences of Marriage for Cohabiting Couples with Children (Research Brief)
Elaine Maag

Tax and transfer programs can create significant bonuses and penalties for low- and moderate-income cohabiters with children. We find that federal tax laws can create marriage penalties that reach almost 10 percent of earnings for our hypothetical couples earning $40,000 or $50,000 a year. In contrast, a prototypical couple earning $20,000 a year could receive a marriage bonus in excess of 10 percent of earnings. Because the transfer programs we consider largely treat cohabiting parents the same as married couples, they create neither significant marriage penalties nor bonuses; however, there may be instances in which couples are misclassified and receive transfer benefits as separate households when cohabiting which could lead to marriage penalties from those programs.

Published: 09/07/15
Availability:   PDF


Federal and State Income Taxes and Their Role in the Social Safety Net (Research Report)
Elaine Maag

Federal and state income taxes play an important role in providing income support for low-income households by administering refundable tax credits, such as the earned income tax credit (EITC). Using the Urban Institute’s Net Income Change Calculator (NICC), which provides state- and federal-level information on tax and transfer programs in 2008, I calculate the value of TANF and SNAP as well as state and federal income taxes for a single parent working full-time at the minimum wage with two children. In many cases, state and federal tax credits exceed the value of the more traditional safety net programs.

Published: 08/04/15
Availability:   PDF


Most People Receive Refunds at Tax Time (Article/Tax Facts)
Elaine MaagElena Ramirez

Taxpayers routinely have too much income tax withheld. Of the 126 million tax returns the IRS processed through April 17, 2015, almost three-quarters resulted in a refund. The average refund was $2,711 with higher average refunds going to the earliest filers.

Published: 06/09/15
Availability:   PDF


Pilot Project to Assess Validation of EITC Eligibility with State Data (Research Report)
Mike PergamitElaine MaagDevlin HansonCaroline RatcliffeSara EdelsteinSarah Minton

The Earned Income Tax Credit (EITC) annually delivers over $60 billion to low-income working families. The Office of Management and Budget identifies the EITC as having the highest improper payment rate among 13 high error programs. We explore whether state SNAP and TANF administrative data can be used by IRS to reduce erroneous payments and target outreach efforts. Too few EITC claimants receive TANF to make the TANF data useful. SNAP data are unlikely to be useful during pre-refund audits, but may be helpful in audit case selection or in flagging erroneous EITC claims for people without custodial children.

Published: 06/04/15
Availability:   PDF


Investing in Work by Reforming the Earned Income Tax Credit (Research Report)
Elaine Maag

The earned income tax credit (EITC) lifts millions of working families out of poverty, but provides little support to workers without children living at home. Scaling back the EITC and implementing a worker credit based on individual earnings and not contingent on having children at home could provide substantial benefits to all low-income workers, ease administration for the IRS, and encourage work for childless individuals and secondary earners. A broadly available $1,500 credit would cost around $870 billion over 10 years; scaled back options are also available.

Published: 05/20/15
Availability:   PDF


Earned Income Tax Credit in the United States (Research Report)
Elaine Maag

The Earned Income Tax Credit (EITC) provides substantial assistance to low-income working families with children. The credit encourages work for many, though may reduce work or wages for some. Counted in the poverty measure, the EITC would have been credited with lifting 6.5 million people out of poverty in 2012. The credit fails to provide substantial benefits to workers without children, is complicated, has a high erroneous payment rate, and creates substantial marriage penalties for some low- and moderate-income couples. Extending the credit to workers without children or replacing it with an individual worker credit could solve some or all of these criticisms.

Published: 04/09/15
Availability:   PDF


Implications for Changing the Child Tax Credit Refundability Threshold (Article/Tax Facts)
Elaine MaagLydia Austin

This Tax Fact explores the child tax credit’s refundability thresholds since its inception. Currently, the CTC is a $1,000-per-child credit that is partially refundable for households earning more than $3,000. This Tax Fact explores the distribution of credits when the refundability threshold rises to $15,000 in 2018, and finds that families in the lowest income quintile would be affected the most.

Published: 07/24/14
Availability:   PDF

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