Tax Policy Center: Low-Income Households

Credits and Exemptions for Children

info@taxpolicycenter.org ( Elaine Maag) — Wed, 14 Oct 2009 00:00:00 EST

The Earned Income Tax Credit, Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), and the dependent exemption all provide benefits to families with children. In 2009, a single mom (or dad) with two children can receive benefits ranging from $0 to about $7,500 - depending on her income, age of the children, and where the children live. While this assistance is extremely important to many low-income families, they must navigate a bewildering set of rules to take full advantage of the credits. Due to the piecewise implementation of these credits and exemptions, total benefits bounce around erratically as income grows.

The Distribution of Federal Taxes, 2009-12

info@taxpolicycenter.org ( Rachel M. Johnson, Jeff Rohaly) — Fri, 21 Aug 2009 00:00:00 EST

Overall, the federal tax system is progressive. On average, households with higher incomes pay taxes that are a larger share of their income. But barring legislative action, the numerous sunsets and phase-ins that Congress has written into the tax code will result in a tax system that is in a state of flux over the next few years. As a result, current law dictates significant changes in the degree of progressivity in the federal tax system between now and 2012. This paper summarizes the Tax Policy Center's latest estimates of the distribution of federal taxes for 2009 through 2012.

Tax subsidies for private health insurance: Who benefits and at what cost?

Tue, 18 Aug 2009 00:00:00 EST

Policymakers are considering modifications to the tax treatment of employer-sponsored insurance (ESI) as a way to raise revenue to help pay for health reform and provide incentives to reduce health care costs. Understanding how current subsidies work is important to assessing health reform proposals. This brief presents essential information about the structure and distribution of existing tax subsidies for ESI and the implications for policy options.

Tax Proposals in the 2010 Budget

Mon, 16 Mar 2009 00:00:00 EST

President Obama's 2010 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.

Tax Stimulus Report Card: Conference Bill

Fri, 13 Feb 2009 00:00:00 EST

This report card evaluates the provisions of the Finance and Ways & Means Committees' conference tax stimulus bill (the "American Recovery and Reinvestment Tax Act of 2009"). The evaluation is preliminary and does not include all of the provisions in the bill most notably we omit provisions related to state and local debt and recovery zone credits. TPC will update the report card if significant changes occur before Congress passes the bill.

Tax Stimulus Report Card: Senate Finance Committee

Thu, 29 Jan 2009 00:00:00 EST

The Tax Policy Center has graded the key tax provisions of the pending Senate stimulus bill (the "American Recovery and Reinvestment Tax Plan of 2009"). Our grades, which rely on the bill's legislative language, focus on how well these measures would boost the economy in the short run. Accompanying write-ups describe current law, the proposed change, and the short- and long-term effects on the budget, the economy, fairness and tax complexity. We will update the report card as we learn more about the provisions and as the stimulus bill moves through Congress.

Tax Stimulus Report Card: House Bill

Mon, 26 Jan 2009 00:00:00 EST

The Tax Policy Center has graded the key tax provisions of the pending House stimulus bill (the "American Recovery and Reinvestment Tax Plan of 2009"). Our grades, which rely on the bill's legislative language, focus on how well these measures would boost the economy in the short run. Accompanying write-ups describe current law, the proposed change, and the short- and long-term effects on the budget, the economy, fairness and tax complexity. We will update the report card as we learn more about the provisions and as the stimulus bill moves through Congress.

President-Elect Obama's Tax and Stimulus Plans

info@taxpolicycenter.org ( Roberton Williams) — Thu, 08 Jan 2009 00:00:00 EST

During the presidential campaign, Barack Obama proposed a comprehensive tax plan that would raise taxes on high-income taxpayers, cut taxes for low- and middle-income households, and lose $2.9 trillion dollars of revenue over ten years. Obama will take office with the economy in sharp recession and a deteriorating fiscal situation, made worse by new spending on a bailout plan. Faced with those crises, Obama says he will pursue both his campaign tax plan and additional tax-related proposals addressing problems created by the downturn. This paper examines revenue and distributional effects of the tax plan and describes some stimulus proposals.

The Next Stage for Social Policy: : Encouraging Work and Family Formation among Low-Income Men

Wed, 22 Oct 2008 00:00:00 EST

The Earned Income Tax Credit enjoyed marked success bringing low-income women into the labor force in recent years. At the same time, labor force participation by low-income or less-education men stagnated, and declined among young black men. In response to these labor market conditions, this paper analyzes several EITC reform options directed at increasing the EITC for low-income workers, in the hopes of drawing these men into the labor force. We estimate the cost of various proposals and put forth an additional proposal that breaks the EITC into two components one focused on individual workers and one focused on supporting children.

Refundable Credits Have Cut Taxes for Low-Income Households

info@taxpolicycenter.org ( Roberton Williams) — Tue, 19 Aug 2008 00:00:00 EST

In 1979, federal taxes claimed 8 percent of the income of households in the lowest quintile of the income distribution.1 Over the following three decades, the average effective tax rate (ETR) taxes as a percentage of income fell by nearly half to 4.3 percent in 2005. Most of the decline resulted from a sharp drop in the individual income tax, primarily due to expansion of the earned income tax credit and the child tax credit (CTC). Because the EITC is refundable and the CTC is partially refundable, they can reduce a households tax liability below zero and generate a net payment.

Weathering Job Loss : Unemployment Insurance

info@taxpolicycenter.org ( Margaret Simms) — Wed, 16 Jul 2008 00:00:00 EST

Low-wage jobs are often characterized by uncertainty and unpredictable gaps in employment. A majority of workers in these jobs do not have access to the temporary income of unemployment insurance to tide them over when they suffer a job loss. This summary outlines recommendations for updating the program by extending benefits to more workers through changes in eligibility rules and establishing more uniform periods of benefit receipt.

Making Work Pay Enough : A Decent Standard of Living for Working Families

info@taxpolicycenter.org ( Gregory Acs, Margery Austin Turner) — Wed, 16 Jul 2008 00:00:00 EST

One-third of America's families with children are low income, meaning their incomes fall below twice the federal poverty level. Although four in five of these families work, many don't bring home enough to cover the everyday costs of living. In this essay, Acs and Turner outline their proposals to enhance low-income families' purchasing power and reduce unusually high housing costs through a package of reforms and policy initiatives that tackle both the income side and expenditure side of family budgets.

Tax Code and Health Insurance Coverage : Before the House Committee on the Budget

info@taxpolicycenter.org ( Leonard E. Burman) — Thu, 18 Oct 2007 00:00:00 EST

In this testimony Burman argues that there are limitations to using tax credits to expand health insurance coverage. A program of health insurance tax credits combined with reforms of the market for nongroup health insurance could significantly expand coverage, but at a very high cost. The testimony summarizes the current tax treatment of health insurance, the effects of tax subsidies on coverage and health care costs, and discusses ways that tax credits might affect health coverage. Burman offers recommendations and adds that the most cost-effective approach to expanding health insurance coverage may not be a tax subsidy at all, but an expansion of an existing public program, such as Medicaid, S-CHIP, or Medicare.

Reforming the Child and Dependent Care Tax Credit

info@taxpolicycenter.org ( Jeff Rohaly) — Mon, 11 Jun 2007 00:00:00 EST

The child and dependent care tax credit (CDCTC) is a nonrefundable tax credit designed to help offset the expenses of providing care for children under the age of 13 or disabled dependents as long as a parent or caretaker is working or searching for work. In theory, a low-income family can qualify for a maximum $2,100 credit. The credit is not refundable, however, and families with low incomes generally owe little or no income tax. Thus, the theoretical maximum rarely applies in practice. This paper examines the revenue and distributional implications of making the CDCTC fully refundable.

Eligibility for Child Tax Credit by Age of Child

info@taxpolicycenter.org ( Leonard E. Burman, Laura Wheaton) — Tue, 22 May 2007 00:00:00 EST

The child tax credit (CTC) is a $1,000 partially refundable federal income tax credit for each qualifying child under age 17. In 2007, tax filers may claim a refundable credit (over and above any tax liability) equal to 15 percent of the excess of earnings over $11,750, up to the $1,000 maximum per child. The earnings threshold means that families with very low incomes get no benefit from the credit, and others will receive only a partial credit. This brief analysis shows that many families with young children tend have lower incomes and are thus left out. In 2007, 30 percent of qualifying children under age 2 in working families had family incomes too low to benefit from the full credit, compared with 27 percent of children overall and 24 percent of children 10 and older.

Fairness in Tax Policy : Testimony Before Subcommittee on Financial Services and General Government, House Appropriations Committee

info@taxpolicycenter.org ( Leonard E. Burman) — Mon, 05 Mar 2007 00:00:00 EST

In this testimony, Burman summarizes the trends in inequality, examines the role the federal tax system has played in mitigating inequality, and discusses the effect of the tax cuts enacted since 2001. He concludes that while the income tax system provides one mechanism of redistributing the gains of our dynamic free-market economy more equitably, the immediate benefits of the recent tax cuts have accrued disproportionately to those with very high incomes and have undermined tax progressivity. Without knowing how they will be financed, it is impossible to determine how these tax cuts will ultimately affect the distribution of economic burdens in the United States.

The President's Proposed Standard Deduction for Health Insurance : An Evaluation

Thu, 15 Feb 2007 00:00:00 EST

The paper describes the new standard deduction for health insurance, proposed in the FY2008 Budget, and evaluates the extent to which it would meet its stated goals of expanding health insurance coverage and restraining healthcare spending, and its effects on the distribution of tax burdens in the short and long terms. The basic approach would improve the market for health insurance, but inadequate attention was paid to problems in the nongroup market or those facing households with low incomes. In consequence, the plan could actually reduce overall insurance coverage. The paper suggests a variety of ways in which the proposal could be improved so more people would be covered, including those with low incomes or in poor health.

Prescribing Better Under Bush's Health Plan

info@taxpolicycenter.org ( C. Eugene Steuerle) — Wed, 31 Jan 2007 00:00:00 EST

The nation spends more than $250 billion annually on tax incentives for workers to buy health insurance, and the cost is rising fast. Nonetheless, 47 million people lack coverage. By any standard, we aren't getting our money's worth. This article discusses President Bush's proposed health plan, which would give everyone the same income tax deduction as long as they purchased health insurance, and the potential problems with this policy. It suggests that a properly designed voucher is a better vehicle for correcting the existing problems with health insurance.

The President's Health Insurance Proposal - A First Look

info@taxpolicycenter.org ( Leonard E. Burman, Jason Furman, Roberton Williams) — Tue, 23 Jan 2007 00:00:00 EST

The paper describes the basic features of the President's plan and evaluates the extent to which it would meet its stated goals of expanding health insurance coverage and restraining healthcare spending. The basic approach would improve the market for health insurance, but inadequate attention was paid to problems in the nongroup market or those facing households with low incomes. In consequence, the plan could actually reduce overall insurance coverage. The paper suggests a variety of ways in which the proposal could be improved so more people would be covered, including those with low incomes or in poor health.

Tax Credits, the Minimum Wage, and Inflation

info@taxpolicycenter.org ( Elaine Maag) — Fri, 29 Dec 2006 00:00:00 EST

Two primary wage-support policies help low-income families: the minimum wage and targeted tax credits. Since 1997, when Congress last raised the minimum wage, the real value of the minimum wage has fallen about 20 percent because of inflation, while the earned income tax credit (EITC) and child credit have been expanded. This brief illustrates how current tax rules interact with the minimum wage and considers whether increased tax credits could substitute for minimum-wage increases for those earning the federal minimum wage. Increasing tax credits enough to substitute for raising minimum wage is probably infeasible because of the cost and the high marginal tax rates required. A more direct route to helping low-wage workers is to raise the minimum wage and index it to inflation.

Analyzing Recent State Tax Policy Choices Affecting Low-Income Working Families : The Recession and Beyond

info@taxpolicycenter.org ( Elaine Maag) — Wed, 15 Nov 2006 00:00:00 EST

Owing to balanced budget requirements, states often raise taxes during recessions. Unless carefully crafted, these tax hikes can fall on low-income working families--the same families likely to be subject to concurrent budget cuts. During the recession that started in 2001, states utilized several tools to balance budgets including tapping rainy day funds, borrowing, increasing taxes, and cutting spending. In many cases, low-income families were shielded from tax increases by increasing or creating state Earned Income Tax Credits (EITCs). This policy brief details state tax changes affecting low-income families between 2002 and 2006.

Should we subsidize work? Welfare reform, the earned income tax credit and optimal transfers

info@taxpolicycenter.org ( Gregory Acs, Eric Toder) — Mon, 30 Oct 2006 00:00:00 EST

During the 1990s, US income-transfer and tax policies shifted towards trying to encourage work among low-income families. Optimal tax theory, however, suggests that work subsidies are usually an inefficient way to raise the incomes of poor families unless the work effort of recipients has external benefits and/or taxpayer/voters prefer redistributing income to the working poor rather than the idle poor. This paper discusses the conditions under which work subsidies may be economically efficient and assesses empirical evidence suggesting that welfare reform and expansions of the EITC have increased work effort among low income families, but is inconclusive about whether the policy shift has enabled them to advance beyond entry-level jobs or benefited their children.

Growth and Decline in Tax Credits For Families With Children

info@taxpolicycenter.org ( Elizabeth Bell, C. Eugene Steuerle) — Mon, 10 Jul 2006 00:00:00 EST

Under current law, there are three major tax credits that affect families with children: the earned income tax credit, the child and dependent care tax credit, and the child tax credit.

The Widespread Prevalence of Marriage Penalties : Testimony Before the Subcommittee on the District of Columbia, Committee on Appropriations, United States Senate

info@taxpolicycenter.org ( C. Eugene Steuerle) — Wed, 03 May 2006 00:00:00 EST

Citizens pay an overall marriage penalty when their combined social welfare benefits less taxes are lower when they are a married couple than when they are two single individuals. Because marriage is optional, marriage penalties or subsidies are assessed primarily for taking wedding vows, not for living together with other adults (although there are some exceptions).

Minimum Wage, the Earned Income Tax Credit, and Inflation

info@taxpolicycenter.org ( Troy Kravitz) — Mon, 05 Dec 2005 00:00:00 EST

The earned income tax credit was enacted to offset the social security payroll tax for low-income working families. The credit has been significantly expanded and now provides substantial income to these families. However, very low-income workers, such as those working at the minimum wage, have seen the value of their credit erode due to interaction between the earned income tax credit, the minimum wage, and inflation.

The True Tax Rates Confronting Families With Children

info@taxpolicycenter.org ( C. Eugene Steuerle, Adam Carasso) — Mon, 10 Oct 2005 00:00:00 EST

The panoply of U.S. tax and transfer programs often act in concert to penalize low-income families who increase their work effort or marry, by saddling them with high effective marginal tax rates. These effective marginal tax rates-often the product of multiple, hidden phase-outs in benefit programs like the EITC, Food Stamps, and Medicaid-are often higher for low-to-middle income families with children earning between $10,000 and $40,000 than they are for more well-to-do families earning above, $90,000. Rates can be so high that families lose nearly a dollar in program benefits for every additional dollar of earnings income they bring in.

The Work Opportunity and Welfare-to-Work Tax Credits

info@taxpolicycenter.org ( Sarah Hamersma) — Fri, 07 Oct 2005 00:00:00 EST

The Work Opportunity Tax Credit (WOTC) offers subsidies to firms that hire disadvantaged workers, including certain welfare recipients, food stamp recipients, people with disabilities, and others. The similar Welfare-to-Work (WtW) tax credit offers firms potentially larger subsidies for hiring long-term welfare recipients. The tax credits from these programs totaled nearly $500 million in 2003, according to the Office of Management and Budget. This brief provides policy background on employer subsidies, discusses participation in the WOTC and WtW, surveys current evidence on the effects of the tax credits on labor market outcomes, and discusses the costs and benefits of the programs.

Tax-Transfer Policy and Labor Market Outcomes

info@taxpolicycenter.org ( Nada Eissa, Austin Nichols) — Fri, 07 Oct 2005 00:00:00 EST

The Earned Income Tax Credit provides nearly $40 billion to low-income families with children. A potential unintended consequence of the credit is lower pretax wages, in which case only part of the subsidy would accrue to workers. We examine the extent to which EITC expansions lower the pretax wages of working parents. Our findings are inconclusive. The gross hourly wages of less-skilled single women are found not to vary by the number of children, as does the EITC. In addition, the wages of black single mothers track the minimum wage for nearly the entire time period.

Who Gets the Child Tax Credit?

info@taxpolicycenter.org ( Leonard E. Burman, Laura Wheaton) — Mon, 03 Oct 2005 00:00:00 EST

In 1997, Congress created a $500 per child tax credit (CTC). It has since been increased to $1,000 and made available to some lower-income families with children, even if they had no tax liability. Still, many low-income families (as well as some with high incomes) receive less than $1,000 per child in tax benefits. Moreover, because of differences in income, family composition, and employment status, nearly half of Blacks and 46 percent of Hispanics receive no or reduced benefits from the CTC because their incomes are too low. By comparison, only 18 percent of White children are in that category.

The Hefty Penalty on Marriage Facing Many Households with Children

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle) — Tue, 13 Sep 2005 00:00:00 EST

Over the past seventy years Congress has enacted dozens of tax and transfer programs, giving little if any attention to the marriage subsidies and penalties that they inadvertently impose. Although the programs affect both rich and poor Americans, the penalties fall most heavily on low- or moderate-income households with children. In this article, Adam Carasso and Eugene Steuerle review important penalties and subsidies, explain how they work, and help fill a big research gap by beginning to provide comprehensive data on the size of the penalties and subsidies arising from all public programs considered together. [ www.futureofchildren.org]

The Distributional Consequences of Federal Assistance for Higher Education : The Intersection of Tax and Spending Programs

Fri, 19 Aug 2005 00:00:00 EST

For nearly a decade, federal higher education subsidies have increasingly been delivered through the tax code rather than through direct spending programs such as grants, loan subsidies, and work study. This paper reviews the results of using new modules in the TRIM and Tax Policy Center microsimulation models to estimate the distributional impacts and expenditure and revenue effects of major federal higher education tax and spending policies. In addition, the paper reports estimates of the effects of some prototypical policy changes in the Pell Grant program as well as in the Hope and Lifetime Learning tax credits.

Who Receives Homeownership Tax Deductions and How Much?

info@taxpolicycenter.org ( Adam Carasso) — Mon, 01 Aug 2005 00:00:00 EST

Some of the costliest tax expenditures the federal government allows go to subsidizing homeownership. In 2004, the total tax expenditure value of the mortgage interest deduction was $70.2 billion while the value for the real estate tax deduction was $19.3 billion. Fifty-four percent of these sums went to taxpayers at or above $100,000 of income and 72 percent went to taxpayers at or above $75,000. Very few taxpayers receive these two subsidies at low incomes-as most low-income tax filers owe little tax, do not itemize, and are less likely to own a home-and very many taxpayers receive them at higher incomes.

Tax Credits to Help Low-Income Families Pay for Child Care

info@taxpolicycenter.org ( Leonard E. Burman, Jeff Rohaly, Elaine Maag) — Tue, 19 Jul 2005 00:00:00 EST

Low-income working families face enormous challenges. Key among them is how to pay for decent child care. The federal income tax code subsidizes child care in several ways. The largest subsidy is the Child and Dependent Care Tax Credit (CDCTC), a nonrefundable tax credit that offsets up to 35 percent of working parents' child care costs, subject to limits. Though not earmarked specifically for child care, the refundable Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) provide more help to low-income working families. This paper considers options to reform the CDCTC to assist low-income families, and examines expansions to the refundable tax credits that help families with children.

State Tax Credits for Child Care

info@taxpolicycenter.org ( Elaine Maag) — Mon, 11 Jul 2005 00:00:00 EST

Child care's costs can be too high for low-income working families. As of 2004, along with a federal credit for child care expenses, 27 states offered tax credits or deductions to offset these expenses. Thirteen states offered a refundable child care credit—at least for low-income families; twelve states, care credits that were non-refundable; and three states, a deduction of child care expenses (Maryland offered both a non-refundable credit and a deduction).

Making the Tax System Work for Low-Income Savers : The Saver's Credit

info@taxpolicycenter.org ( William G. Gale, J. Mark Iwry, Peter Orszag) — Thu, 07 Jul 2005 00:00:00 EST

The federal tax system provides little incentive for participation in tax-preferred saving plans to households that most need to save more for retirement and whose contributions would most likely represent an actual increase in savings. By contrast, the tax code provides its strongest incentives to those who already are generally better prepared for retirement and who are more likely to use tax-preferred vehicles as a shelter than as an opportunity to increase overall saving. The saver's credit, helps correct this "upside-down" structure of tax incentives for retirement saving.

How to Better Encourage Homeownership

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle, Elizabeth Bell) — Wed, 29 Jun 2005 00:00:00 EST

The way federal housing benefits are doled out suggests a U-shaped curve; subsidies are heaped on most households at higher incomes and some at very low incomes. Those in between get little. This brief describes revenue-neutral reforms that would level out the U-shaped curve and deliver ownership subsidies more equitably and efficiently to lower-to-middle-income households. Converting home-related tax deductions into refundable, capped credits introduces greater progressivity into the tax system, encourages homeownership among those at lower incomes, and curtails government subsidies for ever greater amounts of home borrowing.

Tax Subsidies to Help Low-Income Families Pay for Child Care

info@taxpolicycenter.org ( Leonard E. Burman, Elaine Maag, Jeff Rohaly) — Thu, 23 Jun 2005 00:00:00 EST

Low-income working families face enormous challenges. Key among them is how to pay for decent child care. The largest federal subsidy is the Child and Dependent Care Tax Credit (CDCTC), a nonrefundable tax credit that offsets up to 35 percent of working parents' child care costs, subject to limits. Though not earmarked specifically for child care, the refundable Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) provide more help to low-income working families. This paper considers options to reform the CDCTC to assist low-income families. Expansions to the refundable tax credits that help families with children are also analyzed.

Tax Policies to Help Working Families in Cities

info@taxpolicycenter.org ( Alan Berube, William G. Gale, Tracy Kornblatt) — Mon, 13 Jun 2005 00:00:00 EST

This paper examines how existing federal tax rules affect low- and middle-income working families in cities, and finds that several tax policy options could provide better economic opportunities and incentives for these households. Policies that expand and modify the child care and dependent care tax credit, the saver's credit, and subsidies for health insurance, or that alter the structure of homeownership subsidies away from deductions and toward capped credits for homeownership, could improve the welfare of millions of working families in cities, and should receive the attention of both urban leaders and federal policy makers in the future.

Designing a Work-Friendly Tax System : Options and Trade-Offs

Thu, 09 Jun 2005 00:00:00 EST

The federal tax system often imposes its highest effective marginal tax rates on low- and moderate-income individuals. This paper suggests several ways to reduce those high effective marginal rates but illuminates the large trade-offs involved. One approach would replace the current earned income credit (EIC) with a $2,000 EIC for working parents and a refundable $1,000 per child tax credit. A more comprehensive approach would integrate the individual income and Social Security tax systems into a single tax system with just two tax rates and a refundable $2,000 EIC for working parents and a $1,000 universal grant for every person.

Making Tax Incentives for Homeownership More Equitable and Efficient

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle, Elizabeth Bell) — Wed, 08 Jun 2005 00:00:00 EST

While many recent evaluations of the effects of housing subsidies in the tax code focus on the choice between renting and owning, this paper examines the distribution and effectiveness of various changes to these subsidies. Specifically, we examine several revenue-neutral reforms that would level out the current U-shaped curve of housing benefits and deliver ownership subsidies more equitably and efficiently to lower-to-middle-income households. Implementing reform requires careful design, administrative, and behavioral considerations. Appropriately done, converting home-related tax deductions into refundable, capped credits could encourage homeownership at lower incomes and curtail government subsidies for ever greater amounts of home borrowing.

The Impact of Tax Reform on Low- and Middle-Income Households : Testimony Submitted to the House Committee on Ways and Means

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 08 Jun 2005 00:00:00 EST

This testimony focuses on how the income tax system affects low- and middle-income taxpayers and the potential effects of tax reform. Despite its flaws and some recent erosion, the income tax is highly progressive and is an important source of income support for low-income households. Tax reform could help low- and middle-income households by reducing their tax burdens further, but some so-called fundamental tax reform proposals could shift the tax burden away from those most able to pay to those least able. Moreover, the claimed economic gains from such proposals are speculative at best, based solely on theoretical models that have little relationship to economic reality.

Improving Tax Incentives for Low-Income Savers : The Saver's Credit

info@taxpolicycenter.org ( William G. Gale, J. Mark Iwry, Peter Orszag) — Tue, 07 Jun 2005 00:00:00 EST

Taxes and Marriage for Cohabiting Parents

info@taxpolicycenter.org ( Elaine Maag) — Mon, 23 May 2005 00:00:00 EST

Provisions in the federal income tax code that treat married couples as one tax unit and cohabiting couples as two tax units result in both marriage penalties and bonuses. This analysis uses data from the 2002 National Survey of America's Families (NSAF) to show the extent to which low-income, cohabiting parents face marriage penalties and bonuses under 2003 tax law and 2008 tax law, when current marriage related provisions from the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) phase-in completely.

A Unified Children's Tax Credit

info@taxpolicycenter.org ( Adam Carasso, Jeff Rohaly, C. Eugene Steuerle) — Sun, 15 May 2005 00:00:00 EST

We suggest a tax reform that would repeal the EITC, the child tax credit, and the dependent exemption and replace them with a far simpler and often more generous Unified Child Credit (UCC) by 2010. Furthermore, while the dependent exemption is not allowed under the alternative minimum tax (AMT) and nearly 30 million taxpayers will be on the AMT in 2010, the UCC would provide necessary AMT relief in lieu of the dependent exemption and can be the vehicle for bipartisan AMT reform.

Irreconcilable Differences? : The Conflict Between Marriage Promotion Initiatives for Cohabiting Couples with Children and Marriage Penalties in Tax and Transfer Programs

info@taxpolicycenter.org ( Gregory Acs, Elaine Maag) — Tue, 26 Apr 2005 00:00:00 EST

Encouraging and strengthening marriage continues to move up the U.S. social policy agenda. This analysis uses nationally representative data on cohabiting couples with children from the 2002 round of the National Survey of America's Families (NSAF) to assess marriage penalties or bonuses facing these couples. It examines the consequences of current (2003) federal tax laws, and the incentives that will be in place in 2008 as the final marriage-related provisions of 2001's tax reform are phased in.

Disparities in Knowledge of the EITC

info@taxpolicycenter.org ( Elaine Maag) — Mon, 14 Mar 2005 00:00:00 EST

The Earned Income Tax Credit (EITC), administered through the federal income tax system, is the largest cash assistance program for low-income families. Data from the 2001 National Survey of America's Families (NSAF) show large disparities in who knows about the EITC amongst families with income below twice poverty. Only a small portion (27.1 percent) of low-income Hispanic parents know about the EITCsignificantly less than their peers of other races and ethnicities.

High-Income Families Benefit Most from New Education Savings Incentives

info@taxpolicycenter.org ( Susan Dynarski) — Mon, 28 Feb 2005 00:00:00 EST

If funds from education savings plans are not used for schooling, the penalties more than offset the tax benefits for lower-income families. But higher-income families gain even if their children do not go to college. A new breed of tax-advantaged savings vehicle has emerged for the college bound. Earnings on both the federal Coverdell Education Savings Account (ESA) and the state-level 529 savings plan are tax-free if the funds are used for postsecondary education. One reason that the advantages of these education plans rise sharply with income is that that those with the highest marginal tax rates benefit the most from sheltering income. This brief explains how these new college plans work.

The Trend in Federal Housing Tax Expenditures

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle, Elizabeth Bell) — Mon, 28 Feb 2005 00:00:00 EST

Tax programs that provide deductions to homeowners or credits to both builders and owners, greatly exceed direct federal outlays on housing. The beneficiaries of these tax programs tend to be middle-to-upper income families who own their homes while the recipients of outlays tend to be lower income families who rent. In effect, the federal government pays those with more income to own their homes while paying those with less income to rent.

Paying the Price? : Low-Income Parents and the Use of Paid Tax Preparers

info@taxpolicycenter.org ( Elaine Maag) — Tue, 01 Feb 2005 00:00:00 EST

Low-income parents use paid preparers more frequently than other parents. This high reliance may be a good thing. Among low-income parents who know about the Earned Income Tax Credit (EITC) those who receive help are more likely to receive the EITC than their peers who prepare their returns independently. Although use of a paid preparer could obfuscate one's knowledge of important tax benefits if the paid preparer does not explain their calculations, this does not appear to be the case. We continue to note that significantly fewer Hispanic parents know about the EITC than other low-income parents.

Tax Reform: Prospects and Possibilities : Statement before the Committee on the Budget United States House of Representatives

info@taxpolicycenter.org ( C. Eugene Steuerle) — Wed, 06 Oct 2004 00:00:00 EST

The gains in efficiency, equity, and simplicity from systematic tax reform could be substantial. However, to achieve those gains requires attention to many details. Tax reform efforts have failed often, but they have also succeeded, especially when rising problems created the opportunity and demand for reform, and tough issues were tackled in a spirit of bipartisan cooperation.

Tax Preparation for Low-Income Households, Knowledge of the EITC

info@taxpolicycenter.org ( Elaine Maag) — Mon, 02 Aug 2004 00:00:00 EST

The Earned Income Tax Credit--the nation's largest cash assistance program for working families--is often criticized for adding complexity to an already overly-complex tax system. This Tax Fact shows that families which are more likely to be eligible for the EITC also are more likely to seek assistance in filing their tax returns.

Projected Distribution of EITC Claims in 2003

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle) — Mon, 19 Jul 2004 00:00:00 EST

Enacted in 1975, and adjusted or expanded in the following years, the earned income tax credit costs more than the Temporary Assistance of Needy Families (TANF) program and almost as much as Food Stamps. But who benefits and by how much?

An Analysis of the 2004 House Tax Cuts

info@taxpolicycenter.org ( Leonard E. Burman) — Thu, 17 Jun 2004 00:00:00 EST

The House of Representatives has passed variants on four provisions in President Bush's FY2005 Budget: marriage penalty relief (H.R. 4181), a temporary increase in the AMT exemption (H.R. 4227), an increase in the 10-percent tax bracket thresholds (H.R. 4275), and an increase in the child credit and making it available to taxpayers with higher incomes (H.R. 4359). This paper discusses the potential implications of those bills on revenues, the distribution of tax liabilities, and the economy.

The Saver's Credit: Issues and Options

info@taxpolicycenter.org ( William G. Gale, J. Mark Iwry, Peter Orszag) — Mon, 03 May 2004 00:00:00 EST

This paper provides an overview of the rationale, history, and possible modifications to the saver's credit, which was enacted as part of the 2001 tax legislation. The tax system in general provides little incentive for participation in tax-preferred saving plans to households who most need to save more for retirement and who, if they do contribute, are most likely to use the accounts to raise net saving. By contrast, the tax code provides its strongest incentives to those who are generally already better prepared for retirement, and who are more likely to use tax-preferred vehicles as a shelter than as an opportunity to increase overall saving. The saver's credit helps to correct this "upside down" structure of tax incentives for retirement saving. It is the first and only major federal legislation directly targeted to promoting tax-qualified retirement saving for moderate- and lower-income workers. The limited experience with the saver's credit to date has been encouraging. Options for strengthening the credit include making the credit refundable, making it permanent, expanding it to provide larger incentives for middle-class households, and rationalizing the phase-out of the credit. Such changes--which are under active consideration by leading pension policymakers--would help lower- and middle-income families save for retirement, reduce economic insecurity and poverty rates among the elderly, and raise national saving.

State Earned Income Tax Credits

info@taxpolicycenter.org ( Deborah Kobes) — Mon, 29 Mar 2004 00:00:00 EST

The federal earned income tax credit (EITC) was established in 1975 as part of the individual income tax to offset payroll taxes for low-income working families. After several expansions, the refundable tax credit is now the largest federal cash assistance program for low-income families. A growing number of states have adopted their own EITCs.

Relationship Between Tax Entry Thresholds and Poverty

info@taxpolicycenter.org ( Elaine Maag) — Mon, 15 Mar 2004 00:00:00 EST

The tax entry threshold is the amount of income a family can earn prior to owing federal income taxes. The poverty threshold is considered to be the minimum dollar amount needed for individuals, couples, or families to purchase food and meet other basic needs. The poverty level increases with family size. How the two relate provides one way to measure how the tax system treats low-income families. If the tax entry threshold falls below the poverty threshold, policy makers might be concerned that low-income families are being asked to pay too much tax.

Income Tax Statistics for Sample Families, 2003

info@taxpolicycenter.org ( Leonard E. Burman, Mohammed Adeel Saleem) — Mon, 19 Jan 2004 00:00:00 EST

In the U.S. federal income tax system, the effective marginal tax rates and the average tax rates vary significantly from the statutory tax rates. These differences are important since they influence the incentives to work, save and to comply with the tax system. This article measures these differences for single individuals and families with different income levels and discusses why these differences exist. Often, hidden taxes and subsidies interact, making the effective marginal tax rate an amalgam of different effects.

Federal Financial Aid for Higher Education : Programs and Prospects

info@taxpolicycenter.org ( Elaine Maag, Katie Fitzpatrick) — Thu, 01 Jan 2004 00:00:00 EST

In recent years, Congress has augmented traditional financial aid programs for higher education with tax-based subsidies. The tax subsidies can be very helpful to middle-income students who may not have been eligible for aid through traditional channels, but may be worth little or nothing to students from low-income families. This paper reviews financial assistance for higher education available through both traditional spending programs (grants, loans, and work-study) and tax assistance (credits, deductions, and tax-preferred savings plans). It summarizes recent research findings on the effectiveness of this aid and interactions among the various programs. It also discusses the role of future tax and fiscal policy choices in determining the level and nature of resources available for higher education needs.

Distribution of Federal Taxes and Income, 1979-2000

info@taxpolicycenter.org ( William G. Gale) — Mon, 29 Sep 2003 00:00:00 EST

The Congressional Budget Office recently released new estimates of the distribution of taxes and income between 1979 and 2000. CBO includes all federal taxes except estate and gift levies; counts as income all cash income, taxes paid by businesses, 401(k) contributions, and in-kind benefits; and uses standard incidence assumptions. Income is aggregated across household members and adjusted for household size.

Nonfilers and Filers With Modest Tax Liabilities

info@taxpolicycenter.org ( Peter Orszag, Matthew Hall) — Mon, 04 Aug 2003 00:00:00 EST

The effects of income tax changes on the economy and the distribution of after-tax income depend in part on the population that does not file a tax return or that does file a return but owes little or no net income tax liability. These types of tax units featured prominently in the debate over the 2003 tax legislation. The Tax Policy Center (TPC) model contains information on both tax filers and nonfiling tax units. This article describes the household composition of nonfilers and filers with modest tax liability for 2003.

Tax Evasion, IRS Priorities, and EITC Precertification : Statement of Leonard E. Burman before the United States House of Representatives Committee on Ways and Means; On Waste, Fraud, and Abuse

info@taxpolicycenter.org ( Leonard E. Burman) — Thu, 17 Jul 2003 00:00:00 EST

The testimony discusses current statistics on tax evasion, the argument for trying to stem it, and why IRS efforts so far have been disappointing. It then focuses on specific issues related to the earned income tax credit (EITC). The testimony concludes that, while deterring system-wide tax evasion should be a high priority, the approach of targeting EITC recipients for intrusive pre-audits represents a poor use of limited compliance resources and threatens to undermine a highly effective program.

Research Required for the EITC Precertification Procedure

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 14 Jul 2003 00:00:00 EST

On June 13, 2003, the IRS requested public comments on a proposed EITC procedure. The goal of this new EITC procedure, known as precertification, is to reduce EITC error rates by individuals who are ineligible. Because a variety of questions have been raised about this procedure, and also because of its embryonic stage of development, the IRS wants to start with a pilot study that involves 45,000 filers.

Tax Evasion, IRS Priorities, and the EITC : Statement of Leonard E. Burman before the United States House of Representatives Committee on the Budget; On Waste, Fraud, and Abuse In Federal Mandatory Programs

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 09 Jul 2003 00:00:00 EST

Tax Reform for Families : An Earned Income Child Credit

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle, Jeff Rohaly) — Tue, 01 Jul 2003 00:00:00 EST

[ Brookings Institution] This brief argues that the time is ripe for an integrated credit that combines the Earned Income Tax Credit (EITC) and the CTC into an Earned Income Child Credit (EICC). The proposed EICC simplifies and standardizes the definition of qualifying children and those who may claim them, and indexes the new credit for inflation so that it retains its purchasing power over time. The EICC also provides enhanced benefits to low-income working families and reduces marginal tax rates. One version would cost $6 billion relative to current law (JGTRRA) in calendar year 2003.

Give the 'Lucky Duckies' a Helping Hand, Too

info@taxpolicycenter.org ( Leonard E. Burman) — Fri, 06 Jun 2003 00:00:00 EST

[Newsday] The tax bill that President George W. Bush signed into law last week sped up most of the 2001 tax cuts' provisions that were supposed to phase in gradually. Left out, however, were provisions that would have helped low-income working familiesincluding the increase in the refund rate for the child tax credit. Why were low-income working families left out in the cold? It could be because they are "lucky duckies"as the Wall Street Journal calls workers with earnings so meager that they do not owe income tax.

Working Poor Won't Get Quick Relief : Earned Income Tax Credit Imposes Marriage Penalty on Low-Income Couples

info@taxpolicycenter.org ( Katie Fitzpatrick) — Wed, 21 May 2003 00:00:00 EST

[Dayton Daily News] The president's 2003 tax proposals include accelerating the so-called "marriage penalty" relief for middle- and upper-class married couples, rather than phasing in the change over a decade. Yet, for the largest source of cash assistance to low-income working familiesthe Earned Income Tax Creditthe administration has elected to ignore quicker remedies to the marriage penalty. While the tax credit is a vital mechanism for helping the working poor escape poverty, it imposes substantial marriage penalties on low-income couples.

Tax Entry Thresholds, 2000-2011

info@taxpolicycenter.org ( Elaine Maag) — Mon, 12 May 2003 00:00:00 EST

In 1986, a policy decision was made to exempt poor people from the income tax. Increases in the earned income tax credit (EITC) and the introduction of the child tax credit (CTC) have increased the so-called "tax entry threshold" since 1986, and provisions in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) would continue that trend through 2010. The CTC is scheduled to increase in stages to $1,000 over the next decade, and EGTRRA created a new lower tax rate for low-income families. The EITC will also increase gradually for many married couples.

Personal Exemption Not What It Used to Be

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle) — Mon, 28 Apr 2003 00:00:00 EST

The personal exemption, designed to shelter a basic minimum income from taxation, has declined in relative importance over time. In the aggregate, while it grew modestly from $406 billion to $505 billion (in real 2002 dollars) from 1948 to 1999, as a fraction of personal income the exemption has declined precipitously, from 27.3 percent to just 6.3 percent.

Higher Payroll Taxes? Why?

info@taxpolicycenter.org ( Harry Holzer) — Tue, 15 Apr 2003 00:00:00 EST

[United Press International] Would most Americans be in favor of raising payroll taxes on the middle class to finance huge income tax cuts for the rich? Unquestionably, no. Yet, that is exactly what President Bush is now proposing. He argues for cutting tax rates on high-income families, eliminating all estate taxes, and tax-sheltering most of their savingsall of which would be financed by the steep payroll taxes that workers in lower-to-middle income families have been paying for decades.

EITC Reaches More Eligible Families Than TANF, Food Stamps

info@taxpolicycenter.org ( Leonard E. Burman, Deborah Kobes) — Mon, 17 Mar 2003 00:00:00 EST

The three largest federal income-support programs for low-income households are the Earned Income Tax Credit (EITC), food stamps, and Temporary Assistance to Needy Families (TANF). While TANF and food stamps are traditional spending programs, the EITC provides more than $30 billion each year through the tax code. The EITC appears to be quite successful in reaching low-income families with children. The figure below shows that from 1990 to 1999, between 80 and 86 percent of eligible households with children claimed the EITC. Participation rates for TANF and food stamps have not remained as stable.

Tax Burden on Poor Families Has Declined Over Time

info@taxpolicycenter.org ( Elaine Maag, Deborah Kobes) — Mon, 03 Feb 2003 00:00:00 EST

Families with children in poverty receive net subsidies from the federal income and payroll tax system, but that has not always been the case. In the 1970s, income tax filing thresholds were low, and even families in poverty who owed no income tax faced substantial payroll taxes. Congress enacted a refundable Earned Income Tax Credit (EITC) in 1975 to offset some payroll taxes for low-income workers. In 1986, 1990, 1993, and 2001, lawmakers greatly expanded the credit for families and moderately for childless workers. The combination of EITC changes, increases in exemptions and deductions, indexation of tax brackets, and expansion of the Child Tax Credit (CTC) has substantially improved the tax treatment of poor families with children.

Growth in the Earned Income and Child Tax Credits

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle) — Mon, 20 Jan 2003 00:00:00 EST

The last decade has seen a surge in the use of the tax system to deliver dollars to families with children. As late as the early 1990s, the most important tax provision applying to children was the dependent exemption. For several decades, however, Congress failed to increase this exemption in line with per capita income growth and, until 1985, for inflation as well. Beginning with tax reform in 1986, Congress expanded the earned income tax credit (EITC) in a series of legislative steps (1986, 1990, 1993, 2001). Meanwhile, lawmakers created the child tax credit (CTC) in 1997 and expanded it in 2001.

Providing Federal Assistance for Low-Income Families through the Tax System : A Primer

info@taxpolicycenter.org ( Frank Sammartino, Eric Toder, Elaine Maag) — Tue, 16 Jul 2002 00:00:00 EST

The federal income tax system has been used in a number of ways to promote favored forms of consumption and investment and to help selected groups of taxpayers. Since the mid-1980s, Congress has increasingly used the federal tax code to support social programs. This trend is likely to continue. We document provisions of the tax code that are aimed at low-income families including their history and recent changes. We also provide a review of literature surrounding the effect of these provisions. Finally, we discuss important differences in spending and tax programs. Understanding tax programs targeted toward low-income families is particularly important at a time when spending programs are being scaled back.

EGTRRA: Which Provisions Spell the Most Relief?

info@taxpolicycenter.org ( Leonard E. Burman, Jeff Rohaly, Elaine Maag) — Mon, 24 Jun 2002 00:00:00 EST

In June 2001, Congress and the president approved the Economic Growth and Reconciliation Act of 2001 (EGTRRA), the largest tax cut in two decades. The multiyear cut, scheduled to phase in gradually over the decade, will reduce taxes (and government revenue) by $1.35 trillion by 2010. EGTRRA then "sunsets" on December 31, 2010, restoring the law to its pre-2001 status. This unusual sunset provision, considered a budget gimmick by many analysts, leaves the long-term outlook uncertain. Few observers, however, expect EGTRRA to disappear entirely. The President and many congressional members have already proposed making the provisions permanent. This brief describes the EGTRRA provisions that benefit low-income and middle-income families and children and estimates the effect of the tax cut over the decade. Families with children benefit more than families without children, and families with high incomes benefit more than those with moderate and low incomes.

Taxpayers with Children and High-Income Households Gain Most From 2001 Tax Cut

info@taxpolicycenter.org ( The Urban Institute) — Mon, 17 Jun 2002 00:00:00 EST

The largest tax cut in 20 years, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), favors families with children over those without children, especially among lower-income taxpayers, and high-income people over those with moderate and low incomes, concludes new research from the nonpartisan Urban-Brookings Tax Policy Center. [View the report]

The 2001 Tax Cut: One Year Later

info@taxpolicycenter.org ( The Urban Institute) — Tue, 04 Jun 2002 00:00:00 EST

[First Tuesdays Transcript] Moderated by Jodie Allen of U.S. News & World Report, this Urban Institute First Tuesdays Forum takes a look at the 2001 Tax Cut also know as the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) one year after it's inception. The panel was made up of the co-directors of the Urban Institute and Brookings Institution's joint Tax Policy Center, Len Burman and Bill Gale. Joining them on the panel were Eric Engen of AEI and former Congressman William Frenzel.

How Marriage Penalties Change Under the 2001 Tax Bill

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle) — Thu, 30 May 2002 00:00:00 EST

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) generally reduces marriage penalties for head of household filers marrying single filers, with combined incomes up to $80,000. The law's relevant marriage penalty provisions in order of effect are (1) the refundable, doubled child credit; (2) the expanded EITC for married couples; (3) the 10 percent tax bracket; (4) the standard deduction for married couples; (5) the expanded 15 percent tax bracket for married couples; and (6) the 25 percent tax bracket. The enhanced child credit does more to relieve marriage penalties than provisions 3, 4, and 5 combined, which are the provisions officially designated for marriage penalty relief in the law. This brief examines the differential effect each provision has on marriage penalty relief for a range of hypothetical couples and makes suggestions for future policy.

The Effect of the 2001 Tax Cut on Low- and Middle-Income Families and Children

info@taxpolicycenter.org ( Leonard E. Burman, Elaine Maag, Jeff Rohaly) — Mon, 29 Apr 2002 00:00:00 EST

The 2001 tax cut has been roundly criticized because so much of the benefit goes to the rich, but the bill also did much to help low- and middle-income families. Most notably, it increased the child tax credit and made it refundablethat is, available to families with incomes too low to owe income tax. The legislation also simplified the EITC and increased it for some married couples. It increased the maximum child care tax credit, created a new 10 percent tax bracket, and raised the standard deduction for married couples, all of which will provide substantial benefit to middle-income families. Like the rest of the tax bill, many of these provisions phase in very slowly, and inflation erodes away much of the value of the advertised increases. Nonetheless, when fully phased in, the tax cuts will be worth over $1,700 per year in tax savings for a family of four at or near the poverty line, and over $1,000 for a family at twice the poverty level. Families with children do better than those without at almost every income level. The exception is upper-middle income families whose benefits are curtailed or eliminated by the alternative minimum tax. And, not surprisingly, the largest overall tax cuts by far will accrue to those with incomes over $200,000. [View the press release]

Temporary Wage Subsidies

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 25 Feb 2002 00:00:00 EST

Providing fiscal or tax subsidies to try to promote additional work and saving is a relatively modern notion. These subsidies may stimulate demand by putting more money in the economy, but they are designed primarily to affect behavior through incentives. Modern industrial economies like the U.S. over time have enacted fiscal subsidy programs within three general categories: permanent capital subsidies, temporary capital subsidies, and permanent labor subsidies. Left off the table consistently has been a fourth option that logically completes the list: temporary labor subsidies. Yet during a downturn this fourth type of option might uniquely be able to provide the best combination of economic incentives for an expanding economy and a fair distribution of the stimulus benefits.

Analysis of GAO Study of EITC Eligibility and Participation

info@taxpolicycenter.org ( Leonard E. Burman, Deborah Kobes) — Tue, 01 Jan 2002 00:00:00 EST

GAO released an analysis on January 11 of Earned Income Tax Credit (EITC) eligibility and participation rates. The study estimates that one fourth of all eligible households do not claim the EITC. However, GAO's study was based on information from two mismatched databases and its conclusions should be taken with a large grain of salt. Given that caveat, the study confirms earlier findings that the participation rate is high - at least 86 percent among families with children. The study's findings do suggest that outreach to raise participation among very low-income households without children may be in order.

How Complexity Arises for Low-Income Taxpayers

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 23 Jul 2001 00:00:00 EST

Senior Fellow Eugene Steuerle suggests a method to direct more refundable dollars to the working poor through simplifications to the Earned Income Tax Credit and other tax policies.

Designing Tax Cuts to Benefit Low-Income Families

info@taxpolicycenter.org ( Frank Sammartino) — Sun, 01 Jul 2001 00:00:00 EST

With support from the Bush administration, the Federal Reserve Board Chairman, and Congress, a major cut in the federal income tax is almost certain. The question now is what type of cut it should be. Proponents often speak as though all tax cuts would benefit all groups. Not all income tax cuts are alike, however. Many popular options in fact provide no benefit to low-income families.

Opportunity at Hand: Revising the Child Credit

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 30 Apr 2001 00:00:00 EST

Senior Fellow Eugene Steuerle describes how a child credit revision has a chance to achieve bipartisan support.

Tax Complexity and the Working Poor : Commentary

info@taxpolicycenter.org ( Leonard E. Burman) — Tue, 17 Apr 2001 00:00:00 EST

[National Public Radio (NPR)]Urban Institute Senior Fellow and former Treasury Deputy Assistant Secretary for Tax Analysis, Len Burman, expounds upon the earned income tax credit (EITC) as he recounts his experiences with the confusing EITC while helping a single mother with her taxes.

Two Issues Not on the Current Tax Radar Screen

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 16 Apr 2001 00:00:00 EST

Senior Fellow Eugene Steuerle mentions two items that seem to be just below the radar screen of most of those following the tax cut debate: the adjustment of taxation of social security benefits and increases in child credits.

Moynihan's Last Senatorial Hurray?

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 16 Oct 2000 00:00:00 EST

Senior Fellow Eugene Steuerle offers retiring Senator Moynihan a suggestion for one last bill to propose: a simple requirement that the poor and middle class should pay no higher tax rate on their next dollar of income earned than do the rich. If they do, then tax and expenditure authorities have the regulatory power to adjust the rates.

The New Federalism and State Tax Policies Toward the Working Poor

info@taxpolicycenter.org ( Elaine Maag, Diane Lim Rogers) — Fri, 01 Sep 2000 00:00:00 EST

This paper discusses how state income taxes and sales taxes affect the working poor. While some states impose substantial burdens through income taxes with low thresholds and/or sales taxes that do not exempt necessities, others provide generous subsidies through refundable earned income tax credits similar to the federal earned income tax credit. A few states go beyond the federal model and also provide refundable child care credits. In evaluating the role of tax policy to assist low-income people, policymakers need to study the incentives and disincentives associated with various features of the tax system.

Combining Child Credits, the EITC, and the Dependent Exemption (Part 2 of 2) : Part Two: The Various Rationales

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 01 May 2000 00:00:00 EST

In this essay Senior Fellow Eugene Steuerle offers reasons to support a more unified structure for administering the EITC, child credit, and dependent exemption.

Combining Child Credits, the EITC, and the Dependent Exemption (Part 1 of 2) : Part One: Is a New Momentum Being Created?

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 24 Apr 2000 00:00:00 EST

In this essay Senior Fellow Eugene Steuerle describes various proposals to reform the EITC and other tax programs for low-income people.

Tax Controversy Among the Low-Income Population

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 17 May 1999 00:00:00 EST

Senior Fellow Eugene Steuerle offers the expertise of American University Professor Janet Spragens, executive director of the American Tax Policy Institute. He shows that she made a strong case that more attention ought to be paid to the needs of low-income taxpayers. Indirectly, she points to significant costs arising from the failure of Congress, the Treasury, and the White House to be able to come together to make an effort toward tax simplification.

A Study of the GSEs' Single-Family Underwriting Guidelines : Executive Summary

Thu, 01 Apr 1999 00:00:00 EST

This exploration combines and analyzes information from three sources to assess the potential effects the GSEs' underwriting and appraisal guidelines on the funding of loans on properties affordable to lower-income people and in underserved areas, and the impacts automated underwriting and credit scoring technology have on low- to moderate-income and minority borrowers. In addition, it includes information about lenders' perceptions about the effects of the GSEs' guidelines on minority mortgage applicants, since minorities' lower average incomes and wealth mean that underwriting guidelines are likely to disqualify higher proportions of minority applicants.

Cheating the Earned Income Tax Credit

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 09 Jun 1997 00:00:00 EST

Senior Fellow Eugene Steuerle suggests that problems facing the Earned Income Tax Credit should not attempted to be solved in isolation.

Child Credits: Opportunity at the Door

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 26 May 1997 00:00:00 EST

Senior Fellow Eugene Steuerle suggests modifications to the child credit that could improve tax, health, and welfare policy.

The Future of the Earned Income Tax Credit (Part 3 of 3) : Part Three: Beyond Welfare

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 03 Jul 1995 00:00:00 EST

Senior Fellow Eugene Steuerle examines the popularity of the Earned Income Tax Credit and its expansion, and warns that policymakers need to be modest in their expectations of it.

The Future of the Earned Income Tax Credit (Part 2 of 3) : Part Two: Distortions and Compliance Problems

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 26 Jun 1995 00:00:00 EST

Senior Fellow Eugene Steuerle examines principal sources of concern about the Earned Income Tax Credit (EITC) regarding the credit's impact on work effort and the extent of noncompliance. His conclusions: (1) All transfers and taxes distort some choices, and the EITC is no exception. The EITC can be best assessed against alternatives that attempt to help low-income households and workers, not as a stand-alone provision. (2) As currently designed, the EITC cannot be fully enforced by the IRS and, to deter abuse, must either be supplemented by further restrictions or be restructured.

The Future of the Earned Income Tax Credit (Part 1 of 3) : Part One: Background

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 19 Jun 1995 00:00:00 EST

Senior Fellow Eugene Steuerle takes a look at how the Earned Income Tax Credit is meeting its policy goals.