The Middle Class Parent Penalty: Child Benefits in the U.S. Tax Code / David T. Ellwood, Jeffrey B. Liebman.

Format:

Book

Author/Creator:

Ellwood, David T.

Contributor:

National Bureau of Economic Research.

Liebman, Jeffrey B.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8031.

NBER working paper series no. w8031

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Middle Class Parent Penalty

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

Low-income families with children receive large tax benefits from the Earned Income Tax Credit, while high income taxpayers receive large tax benefits from dependent exemptions (whose value is greater to those in higher tax brackets). In contrast, middle-income parents receive substantially smaller tax benefits associated with children. This U-shaped pattern of benefits by income, which we call the middle-class parent penalty,' not only raises issues of fairness; it also generates marginal tax rates and marriage penalties for moderate income families that are as high or higher than those facing more well-to-do taxpayers. This paper documents how the tax benefits of children vary with income, and illustrates their impact on marginal tax rates and marriage penalties. It then examines five options for reducing or eliminating the middle-class parent penalty and the high marginal tax rates and marriage penalties it produces.

Notes:

Print version record

December 2000.