Revolutionizing Redistribution: Tax Credits and the American Rescue Plan

Yale Law Journal Forum, Vol. 131 (forthcoming)

Loyola Law School, Los Angeles Legal Studies Research Paper No. 2021-27

21 Pages Posted: 13 Oct 2021 Last revised: 14 Oct 2021

Date Written: October 12, 2021

Abstract

The American Rescue Plan Act (ARPA) dramatically alters the federal government’s approach to redistribution in 2021. Among its boldest reforms are its temporary expansions of the Child Tax Credit and the Earned Income Tax Credit. For the first time, ARPA authorizes meaningful cash support for nonworking families and childless workers, two groups that have been historically disadvantaged by social safety net programs. This Essay considers ARPA’s effects on low-income American taxpayers, spotlighting in particular how the reforms will protect millions of households from being pushed into poverty or further into poverty as a result of paying taxes—a phenomenon called “fiscal impoverishment.” Policy makers must make ARPA’s reforms permanent in order to ensure that low-income taxpayers remain protected past 2021. As they work to do so, policy makers should be mindful of gaps in the tax credits that will undermine the reforms’ positive effects. The Essay identifies several such gaps and argues that Congress should legislate more dramatic inclusion for households with and without children.

Keywords: tax credits, eitc, child tax credit, ctc, american rescue plan, arpa, covid-19, stimulus, redistribution, poverty, inequality, reconciliation bill

JEL Classification: K34, H24, H53, I3, I30, I31, I32, I38

Suggested Citation

Jurow Kleiman, Ariel, Revolutionizing Redistribution: Tax Credits and the American Rescue Plan (October 12, 2021). Yale Law Journal Forum, Vol. 131 (forthcoming) , Loyola Law School, Los Angeles Legal Studies Research Paper No. 2021-27, Available at SSRN: https://ssrn.com/abstract=3941495

Ariel Jurow Kleiman (Contact Author)

Loyola Law School Los Angeles ( email )

919 Albany Street
Los Angeles, CA 90015-1211
United States

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