Tax Simplification: Clarifying Work, Child, and Education Incentives

Elaine Maag (March 30, 2011)

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. See Elaine's paper here.

Eric Toder Testifies Before Senate Committee on Finance

Eric Toder (March 30, 2011)

Eric Toder's testimony before the Senate Finance Committee on how tax law complexity limits the effectiveness of tax incentives. See Eric's testimony here.

How Large Are Tax Expenditures?

Donald Marron (March 28, 2011)

Tax expenditures are getting increased scrutiny from budget hawks and tax reformers. New Treasury estimates, released as part of President Obama's recent budget, indicate that these tax preferences will reduce individual and corporate income tax revenues by almost $1.1 trillion in 2011. Those provisions will also increase spending on refundable tax credits by $108 billion and will reduce payroll and excise tax receipts by $111 billion. Together, the tax expenditures identified by Treasury will total almost $1.3 trillion this year. See Donald's article here.