Tax Policy Center: Marriage Penalties and Taxation of the Family

How Would Reforming the Mortgage Interest Deduction Affect the Housing Market?

Tue, 26 Mar 2013 00:00:00 EST

Opponents of MID reform warn that reducing the deduction would undermine the value of owner-occupied homes and impede the recovery of the depressed housing market. The best available evidence predicts far less dire effects and suggests that some reforms could actually bolster the housing market recovery. However, the results are far from definitive. As debate continues, the Urban Institute plans to further explore behavioral and market changes, strengthening the evidence upon which policymakers can rely.

Options to Reform the Deduction for Home Mortgage Interest

info@taxpolicycenter.org ( Amanda Eng, Harvey Galper, Georgia Ivsin, Eric Toder) — Mon, 18 Mar 2013 00:00:00 EST

Taxpayers can currently deduct interest on up to $1 million in acquisition debt used to buy, build, or improve their personal residences and interest on up to another $100,000 of home equity loans. This brief estimates the effects on revenue and the distribution of the tax burden of proposals that would replace the current mortgage interest deduction with a non-refundable interest credit of either 15 or 20 percent of interest and reduce the ceiling on the amount of all eligible mortgage debt to $500,000. We also estimate the revenue effect of phasing in the proposals over five years.

How Marginal Tax Rates Affect Families at Various Levels of Poverty

Thu, 20 Dec 2012 00:00:00 EST

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.

Why Some Tax Units Pay No Income Tax

Wed, 27 Jul 2011 00:00:00 EST

About 46 percent of American households will pay no federal individual income tax in 2011, roughly half of them because of structural features of the income tax that provide basic exemptions for subsistence level income and for dependents. The other half are nontaxable because tax expenditures special provisions in the tax code that benefit selected taxpayers or activitieswipe out tax liabilities and, in the case of refundable credits, yield net payments from the government. Provisions that benefit senior citizens and low-income working families with children particularly affect households with income under $50,000 but other factors make higher-income households nontaxable.

The Impact of the Bipartisan Tax Fairness and Simplification Act of 2010 ("Wyden-Gregg") on Effective Marginal Tax Rates

info@taxpolicycenter.org ( Katherine Lim, Jeff Rohaly) — Wed, 14 Jul 2010 00:00:00 EST

The Wyden-Gregg tax reform proposal would represent a broad reform of the federal income tax system. This paper examines the plan's impact on individuals' effective marginal tax rates (EMTR), the incremental amount of tax owed on an additional dollar of income. We examine the impact on the EMTR for both wage income and realized capital gains against current law and current policy baselines. We find the Wyden-Gregg plan would lower the overall average EMTR on wages relative to both current law and current policy, but would raise the overall average EMTR on gains when compared with those same two baselines.

Why Nearly Half of Americans Pay No Federal Income Tax

info@taxpolicycenter.org ( Roberton Williams) — Wed, 09 Jun 2010 00:00:00 EST

During the recent tax filing season, cable news and talk radio repeatedly discussed the Tax Policy Center's (TPC's) estimate that 47 percent of Americans would pay no federal income tax for 2009. However much of the commentary failed to explain why.

Health mandate: It's just a tax break in disguise

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 14 Apr 2010 00:00:00 EST

CNNMoney.com. Len Burman discusses the health insurance mandate.

5 Myths about your taxes

info@taxpolicycenter.org ( Rosanne Altshuler, Roberton Williams) — Mon, 05 Apr 2010 00:00:00 EST

April is here, which means it's almost time to pony up and render unto Caesar. We've gathered our receipts and other documents, and dragged ourselves to the strip-mall tax preparer or fired up do-it-yourself software to determine how big our refund is -- or how much we owe Uncle Sam. No one likes to pay taxes, but as we get ready to stand in line at the post office on the 15th, it might be useful to dispel some of the most common myths about this springtime ritual.

Considerations in Efforts to Restructure Work-Based Credits

info@taxpolicycenter.org ( Steve Holt, Elaine Maag) — Mon, 09 Nov 2009 00:00:00 EST

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.

The Opacity of Marginal Tax Rates

info@taxpolicycenter.org ( Rosanne Altshuler, Jacob Goldin) — Wed, 21 Oct 2009 00:00:00 EST

Suppose that a taxpayer earns an additional dollar of income. How much tax would she owe on that dollar? A natural way to answer this question would be to look up the taxpayers statutory tax rate - the tax rate corresponding to her tax bracket and filing status.

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 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.

Effective Tax Rates for Different Kinds of Households

info@taxpolicycenter.org ( Roberton Williams) — Mon, 14 Jan 2008 00:00:00 EST

One measure of the tax burden imposed on households is their effective tax rate (ETR)the total taxes they pay measured as a percentage of their pretax income. ETRs vary across types of households because of differences in sources and levels of income and in how the tax system treats taxpayers in different situations. Each year the Congressional Budget Office estimates ETRs for individual and corporate income taxes, payroll taxes, and excise taxes for different types of households, as well as all households as a group.

Distributional Effects of the Major Individual Income Tax Provisions of H.R. 3970

info@taxpolicycenter.org ( Greg Leiserson, Jeff Rohaly) — Fri, 26 Oct 2007 00:00:00 EST

On October 25, 2007, Ways and Means Committee Chairman Charles Rangel (D-NY) unveiled H.R. 3970, The Tax Reduction and Reform Act of 2007, sweeping tax reform legislation that would provide for a revenue-neutral repeal of the individual alternative minimum tax (AMT). This paper describes the proposal and provides distribution tables that analyze the impact of the major individual income tax provisions in the bill.

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.

Income Taxes and Tax Rates for Sample Families, 2006

info@taxpolicycenter.org ( Greg Leiserson) — Tue, 02 Jan 2007 00:00:00 EST

This article examines variations in tax liability and tax rates confronting typical families as income and the number of children change for tax year 2006. Although the examples represent very simple tax situations, they illustrate how hidden taxes and subsidies can make the marginal tax rate an amalgam of different effects. Often, the effective marginal tax rates and average tax rates can vary significantly from the statutory tax rates because of the phase-ins and phase-outs of deductions and credits, the individual alternative minimum tax, progressive tax schedules, and other aspects of our income tax system.

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).

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.

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.

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]

Suppose They Took the AM Out of the AMT?

info@taxpolicycenter.org ( Leonard E. Burman, David Weiner) — Thu, 25 Aug 2005 00:00:00 EST

The individual alternative minimum tax (AMT) was originally intended to assure that high-income people paid at least some tax, but the AMT was poorly designed and affects more middle-income people every year. The AMT raises a lot of tax revenue, however: reforming or eliminating it could cost $500 billion over the next decade. Some suggest that the best option would be to make the AMT the regular tax system. This paper examines the implications of basing a reformed tax system on AMT rules. (A shorter version of this paper is forthcoming in the 97th Annual Conference NTA Papers and Proceedings.)

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.

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.

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.

Tax Reform and Fairness for Families : Presentation to the President's Advisory Panel on Tax Reform New Orleans, LA

info@taxpolicycenter.org ( C. Eugene Steuerle) — Wed, 23 Mar 2005 00:00:00 EST

Tax reform affects many areas of policy--children, charitable contributions, federal policy toward states and localities, health care, retirement policy, and business--to mention only a few. Tax reform cannot dodge these important issues, but must come to grips with how each of these areas of policy should be treated under a reformed system. In this powerpoint testimony, Gene Steuerle outlines many of the ways that current policies violate norms of simplicity, fairness, and efficiency and suggests possible means of improvement.

Suppose they took the AM out of the AMT?

info@taxpolicycenter.org ( Leonard E. Burman, David Weiner) — Sat, 13 Nov 2004 00:00:00 EST

The individual alternative minimum tax (AMT) was originally intended to assure that high-income people paid at least some tax, but the AMT was poorly designed and affects more and more middle-income people every year. The AMT raises a lot of tax revenue, however: reforming or eliminating it could cost $500 billion or more over the next decade. Consequently, some suggest that the best option would be to make the AMT the regular tax system, rather than an alternative. This paper examines the implications of basing a reformed tax system on the AMT rules.

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.

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.

Marriage Penalty Relief Throws Millions Onto the AMT

info@taxpolicycenter.org ( Leonard E. Burman) — Tue, 27 Apr 2004 00:00:00 EST

The House of Representatives passed a marriage penalty relief provision that would, ironically, subject three million married couples to the complex and costly alternative minimum tax (AMT). This Marketplace commentary recommends that Congress deal with the real problems in the tax code--shortage of revenue and unnecessary complexity--rather than exacerbate them.

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.

The Cost of Marriage Inequality to Gay, Lesbian and Bisexual Seniors : A Human Rights Campaign Foundation Report

info@taxpolicycenter.org ( Lisa Bennett, Gary Gates) — Wed, 21 Jan 2004 00:00:00 EST

When a gay, lesbian, or bisexual senior dies, his or her surviving partner faces a financial loss that can amount to tens of thousands of dollars because the couple cannot be recognized as legally married in the United States. Without marriage, Social Security survivor benefits are not available, retirement plans inherited from a partner are heavily taxed, and estate taxes apply to the inheritance of a home. Using data from Census 2000, this report analyzes and quantifies how the lack of legal marriage recognition affects the financial stability of same-sex senior couples.

How the 2001 and 2003 Tax Cuts Affect Hypothetical Families

Mon, 22 Dec 2003 00:00:00 EST

How do the 2001 and 2003 tax cuts affect families and tax return filers? What are the tax consequences of having children or being middle-income? The following discussion addresses these questions for an array of families with varying income, number of children, and marital status, for tax year 2003. The table shows the combined amount of tax cut each hypothetical household received from the 2001 and 2003 tax cuts at different levels of adjusted gross income (AGI).

How the 2001 and 2003 Tax Cuts Affect Hypothetical Families in Tax Year 2003

info@taxpolicycenter.org ( Adam Carasso) — Sun, 30 Nov 2003 00:00:00 EST

How do the 2001 and 2003 tax cuts affect families and tax filers? What are the tax consequences of having children or being middle-income? This brief and accompanying tables address these questions for an array of families with varying income, number of children, and marital status, for tax year 2003.

The AMT: Projections and Problems

info@taxpolicycenter.org ( Leonard E. Burman, William G. Gale, Jeff Rohaly) — Mon, 07 Jul 2003 00:00:00 EST

The individual alternative minimum tax (AMT) operates parallel to the regular income tax, imposing a different income definition, allowable deductions, and rate structure. The AMT grew out of a minimum tax that first took effect in 1970, due to legislation enacted in response to public outrage in the wake of testimony by Treasury Secretary Joseph W. Barr (1969) that 155 high-income households had paid no income tax in 1966. Although it has historically applied to only a very small share of taxpayers, the tax is projected to grow rapidly over the next decade, transforming it from a class tax to a mass tax. The growth of the AMT will create problems of equity, efficiency, complexity, and transparency in the tax system. It will also inevitably force policy makers to focus more attention on the issue, in part because many reform options will prove expensive. This column provides new projections of AMT taxpayers and revenues, and uses the projections to examine some broader implications for tax policy and the AMT.

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.

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.

The President's Proposal to Accelerate the Child Tax Credit and Related Options

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle) — Fri, 31 Jan 2003 00:00:00 EST

The Presidents January 7, 2003 economic stimulus proposal for enhancing the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) would, in addition to ending the corporate taxation of dividends and speeding up tax rate and marriage penalty relief, accelerate the increase in the child credit from $600 to $1,000. This brief provides revenue and distributional estimates for the Presidents proposal as well as for different types of amendments that might be considered.

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.

Income Tax Burden Peaked in the 1980s

info@taxpolicycenter.org ( Leonard E. Burman, Elaine Maag) — Mon, 23 Dec 2002 00:00:00 EST

The figure shows one way to assess the federal income tax burden-federal income taxes as a share of income-for a family of four in the middle of the income distribution, and for similar families at twice and half that income level from 1955 to 2001. In 2001, the median family earned $63,278. By comparison, in 1955, the median family earned $4,919 (worth about $32,500 in 2001 dollars).

Fix a Real Tax Mess

info@taxpolicycenter.org ( Leonard E. Burman, William G. Gale) — Thu, 14 Nov 2002 00:00:00 EST

[Newsday] Currently affecting only a few, mostly wealthy, taxpayers, the alternative minimum tax (AMT) will expand dramatically over the next several years, visiting high tax rates and mind-numbingly complex paperwork on unsuspecting middle-class families. Prompt action could reverse those effects, but it would be expensive and neither political party has summoned the nerve to shoulder the burden. Indeed, discussion of the AMT has been absent from the political debate. In fact, last year's tax cut made the problem much worse, as would many of the proposals currently on the table.

Saying 'I Do' after the 2001 Tax Cuts

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle) — Tue, 27 Aug 2002 00:00:00 EST

Various provisions of the 2001 tax cut change the marriage penalties or subsidies lower- and middle-income households may face. We focus on the higher marriage penalties that heads of household filers marrying single filers often confront -- the loss of valuable children's tax benefits for which single, childless taxpayers who marry would not be eligible. Specifically, we model six pertinent provisions of the law and find that (1) overall, the tax cut substantially reduces marriage penalties/increases marriage subsidies for most hypothetical married couples and (2) that the expanded child tax credit delivers the most relief of any provision.

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 ( 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]

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]

Valuing Marital Commitment in our Transfer and Tax Systems : Testimony before the U.S. House of Representatives Subcommittee on Human Resources Committee on Ways and Means

info@taxpolicycenter.org ( C. Eugene Steuerle) — Tue, 22 May 2001 00:00:00 EST

In principle, both American voters and their elected officials want to support marriage and the family. One would expect, then, that our expenditure programs and tax code would reflect this desire. Unfortunately, this is not always the case. Instead of a consistent policy, we have a crazy quilt of expenditure and tax policies that directly affect families, some for the better, some for the worse.

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.

Federal Income Tax Cuts and Low-Income Families

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

Recent large federal budget surpluses have spurred debate on how best to use the money. Some see surpluses as an opportunity to pay down the federal debt, to expand programs to meet such social needs as health care and education, or to secure the future of Social Security. Others propose returning some of the money to taxpayers by cutting federal income taxes, an option championed by President Bush that has widespread support in Congress.

Who Knows about the Earned Income Tax Credit?

info@taxpolicycenter.org ( Katherin Ross Phillips) — Mon, 01 Jan 2001 00:00:00 EST

The Earned Income Tax Credit (EITC) is the largest cash transfer program for low-income parents in the United States. The refundable tax credit supplements wages and offsets taxes paid by low-income workers. Research suggests that the EITC has not only been effective in moving families over the poverty line, but it has also encouraged work among single mothers.

How De Facto Optional Filing Demands Marriage Penalty Relief

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 05 Jun 2000 00:00:00 EST

Senior Fellow Eugene Steuerle discusses the need for marriage penalty relief in the tax code, concluding that a tax world in which single filing is available to all who share resources and even beds but not to those who happen to believe in marriage vows is too capricious and arbitrary to remain standing. Steuerle argues that the system of de facto, optional, single filing forces Congress to respond whether it likes it or not.

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.

Does Social Security Treat Spouses Fairly?

info@taxpolicycenter.org ( C. Eugene Steuerle, Christopher Spiro, Adam Carasso) — Tue, 30 Nov 1999 00:00:00 EST

In 1939, policymakers designed spousal benefitsintended as payment for nonworking wivesbased on the traditional gender roles of a working husband and his dependent spouse. Although this model of the conventional family is quickly being replaced by the two-earner family, spousal benefits have changed very little since their inception. A number of inequities and distortions arise from maintaining benefits based on archaic notions of family structure.

The Uncertain Support Behind 'Marriage Penalty' Relief

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 13 Sep 1999 00:00:00 EST

Senior Fellow Eugene Steuerle examines the political challenges of achieving true marriage penalty relief in the tax code.

Valuing Marital Commitment : The Radical Restructuring of our Tax and Transfer Systems

info@taxpolicycenter.org ( C. Eugene Steuerle) — Thu, 01 Apr 1999 00:00:00 EST

Senior Fellow Eugene Steuerle examines the treatment of marriage in the tax code, and suggests a comprehensive package that literally would change the face of the nation's transfer and tax system.

Reducing Welfare Costs and Dependency: How Much Bang for the Child Support Buck?

info@taxpolicycenter.org ( Laura Wheaton, Elaine Sorensen) — Thu, 01 Oct 1998 00:00:00 EST

The authors examine to what degree has the nation been successful in reducing welfare costs through child support, and how much more welfare savings might we expect if more fathers were to pay child support.

Systematic Thinking About Subsidies for Child Care (Part 3 of 3) : Part Three: Application of Principles

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 09 Feb 1998 00:00:00 EST

Senior Fellow Eugene Steuerle applies a possible set of standards and principles for the development of child care tax policy to key controversial issues surrounding child care in this column.

Systematic Thinking About Subsidies for Child Care (Part 2 of 3) : Part Two: Principles and Standards

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 02 Feb 1998 00:00:00 EST

Senior Fellow Eugene Steuerle offers a set of standards and principles to guide the development of child care tax policies.

Systematic Thinking About Subsidies for Child Care (Part 1 of 3) : Part One: Avoiding the Rush to Judgment

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 26 Jan 1998 00:00:00 EST

This column represents the first in a series that attempts to think systematically about tax and expenditure policy directed toward child care.

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.