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Publications By Author
Author: Maag, Elaine
How Marginal Tax Rates Affect Families at Various Levels of Poverty (Research Report)
Elaine Maag , C. Eugene Steuerle , Caleb Quakenbush , Ritadhi Chakravarti
High marginal tax rates can make moving above poverty very difficult for low-income families. These high tax rates result from increasing direct taxes and decreasing transfer payments. A single parent with two children who increases her wages from poverty-level to 150 percent of poverty-level can face a tax rate between 26.6 percent and over 100 percent, depending on which state she lives in. In addition, her marginal tax rate can vary radically, depending on her earning pattern. This paper shows how sensitive marginal tax rates are to assumptions about state of residence, earning patterns, and program participation.
Published: 12/20/12
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State Tax Systems Can Be Important Part of Safety Net (Article/Tax Facts)
Elaine Maag
Taxes and transfers at the state and federal level can have a large impact on the well-being of low-income families. How large a role states play varies, as demonstrated by the Urban Institute’s recently released Net Income Change Calculator (http://nicc.urban.org). In twelve states, state taxes account for over 10 percent of total support and in others, state income taxes provide no support.
Published: 05/21/12
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Poverty and Income Tax Entry Threshold (Article/Tax Facts)
Elaine Maag
The tax entry threshold is the income level at which a person begins paying federal income taxes. Unlike payroll taxes, income taxes do not start at the first dollar of earnings. Rather, the federal income tax system exempts an amount of income from taxation based on the type of tax unit (married or unmarried, with or without children) and the number of people in the tax unit. Tax credits can raise the tax entry threshold further. This article compares the tax entry threshold to the poverty line providing one way to judge how the tax system treats low-income families and providing a comparison of the relative generosity of the income tax for families with and without children.
Published: 09/07/11
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A Reference Manual for Child Tax Benefits (Discussion Papers)
Elaine Maag , Stephanie Rennane , C. Eugene Steuerle
The individual income tax contains multiple provisions that favor families with children. They range from credits targeted towards low-income families to deductions that favor higher income families. Some provisions benefit a family by virtue of the family having children, others try to incentivize behavior such as work and going to school. This paper describes the various child-related provisions and shows the distribution of who benefits from the provisions. Benefits can be substantial. For example, a single parent with two children could receive a tax subsidy worth almost $9,000. The rules governing the provisions are complex and ripe for reform.
Published: 04/27/11
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Tax Simplification: Clarifying Work, Child, and Education Incentives (Research Report)
Elaine Maag
The federal income tax code is riddled with complex provisions concerning children. Families with children qualify for and receive substantial assistance, but the provisions are difficult for parents to understand and for the IRS to administer. This article proposes making uniform the definition of child — under age 19, regardless of student status — for the key child benefits: the earned income tax credit, the dependent exemption, head of household filing status, and the child tax credit. Savings from the proposal could be used to subsidize higher education, particularly for low-income families that would lose assistance from the EITC. The proposal would simplify the tax system, clarify incentives, and set the stage for broader reform.
Published: 03/30/11
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Tax Proposals in the 2012 Budget (Research Report)
Benjamin H. Harris , Elaine Maag , Donald Marron , Jim Nunns , Joseph Rosenberg , Kim Rueben , Eric Toder , Roberton Williams
President Obama's 2012 Budget contains a number of tax provisions that would cut taxes for low- and middle-income households and raise taxes on wealthier taxpayers. This resource guide describes the tax proposals, offers more detailed commentary on key provisions, and links to tables showing the distributional effects of the overall proposal and various elements of the plan.
Published: 03/28/11
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Who Benefits From the Dependent Exemption? (Article/Tax Facts)
Elaine Maag
The dependent exemption reduces taxable income by a fixed amount ($3,650 in 2010) for each qualifying child in the family. Benefits depend on a family's marginal tax rate. Low-income families receive a tax reduction of up to $365 per exemption compared to high income families that receive a tax reduction of $1,278 per exemption. Benefits flow mostly to families with relatively high incomes. In 2010, TPC estimates 1.5 percent of benefits will accrue to families in the lowest income quintile while 57.1 percent of benefits will accrue to families in the top 40 percent of the income distribution.
Published: 12/30/10
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Simplicity: Considerations in Designing a Unified Child Credit (Research Report)
Elaine Maag
Complexity plagues the tax code for low-income families, particularly with regard to child related credits. Many analysts advocate separating out the essential functions of these credits: subsidizing work, subsidizing children, and subsidizing specifi c activities such as child care. This paper analyzes design considerations in creating a unifi ed child credit and offers options for reforms that range from a complete overhaul of the child and work incentives to a more minor consolidation of highly related tax incentives. Either could form the foundation for reform efforts aimed at simplifying and rationalizing the federal income tax code with respect to children.
Published: 11/22/10
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Extending Tax Credits for Low-Income Families (Research Report)
Elaine Maag
Policymakers should be thinking hard about low-income families with children and the tax code. In 2010, the federal income tax system will deliver substantial assistance to these families through refundable tax credits. The Tax Policy Center estimates a third fewer children would be in poverty if tax credits were counted in a person’s available resources when measuring poverty. They are among the most potent anti-poverty programs for families with children. In 2011, some aid targeted to the poorest families will disappear as the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) and the American Recovery and Reinvestment Act (ARRA).
Published: 07/19/10
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Considerations in Efforts to Restructure Work-Based Credits (Research Report)
Steve Holt , Elaine Maag
The Internal Revenue Code has replaced traditional means-tested programs as the principal means for transferring income to low earners. The largest vehicle is the Earned Income Tax Credit (EITC), now supplemented by both the Child Tax Credit (CTC) and the Making Work Pay tax credit (MWP).
This paper looks at the system's evolution, the important role played by the tax system in assisting low earners, and the complexities presented by the current approach. It offers principles to guide the design of a worker credit and child benefit that would replace the EITC, CTC, and MWP, along with a specific proposal.
Published: 11/09/09
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