Tax Policy Toward Low-Income Families

62 Pages Posted: 14 Mar 2016 Last revised: 2 May 2021

See all articles by Hilary Williamson Hoynes

Hilary Williamson Hoynes

University of California, Berkeley; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Jesse Rothstein

University of California, Berkeley, The Richard & Rhoda Goldman School of Public Policy; University of California, Berkeley, College of Letters & Science, Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 2016

Abstract

In this paper, we review the most prominent provision of the federal income tax code that targets low-income tax filers, the Earned Income Tax Credit (EITC), as well as the structurally similar Child Tax Credit (CTC). We frame the paper around what we see as the programs’ goals: distributional, promoting work, and limiting administrative and compliance costs. We review what is known about program impacts and distributional consequences under current law, drawing on simulations from the Tax Policy Center. We conclude that the EITC is quite successful in meeting its three goals. In contrast, most of the benefits of the CTC go to higher income households. In addition to analyzing current law, we assess possible reforms that would reach groups – for the EITC, those without children; for the CTC, those with very low earnings – who are largely missed under current policy.

Suggested Citation

Hoynes, Hilary Williamson and Rothstein, Jesse, Tax Policy Toward Low-Income Families (March 2016). NBER Working Paper No. w22080, Available at SSRN: https://ssrn.com/abstract=2747200

Hilary Williamson Hoynes (Contact Author)

University of California, Berkeley ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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Jesse Rothstein

University of California, Berkeley, The Richard & Rhoda Goldman School of Public Policy ( email )

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HOME PAGE: http://eml.berkeley.edu/~jrothst

University of California, Berkeley, College of Letters & Science, Department of Economics ( email )

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United States

National Bureau of Economic Research (NBER)

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