Research report An Option to Reform the Income Tax Treatment of Families and Work
James R. Nunns, Elaine Maag, Hang Nguyen
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The income tax provisions related to families and work—filing status, rate schedules, the standard deduction, personal exemptions, the child and earned income tax credits, and the taxation of dependents—are complex, too small to encourage work for many low earners, and unfair to some families. We describe and analyze a comprehensive option that addresses these issues while minimizing the number of “losers” and reducing average tax burdens in all but the highest income quintile, at a cost of about $100 billion per year. We present alternatives to illustrate different policy tradeoffs that could be made in reforming these provisions.
Primary topic Individual Taxes
Research Area Fundamental reform proposals Alternative minimum tax (AMT) Child tax credit (CTC)/Child and dependent care tax credit (CDCTC) Earned income tax credit (EITC) Income tax (individual) Marriage penalties and bonuses