Tax Policy Center: Marriage Penalties and Taxation of the Family
Tax Policy Center reports on: Marriage Penalties and Taxation of the Family - The Tax Policy Center is a joint venture of the Urban Institute and Brookings Institution. The Center is comprised of nationally recognized experts in tax, budget, and social policy who have served at the highest levels of government.

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