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On the Progressivity of the Child Care Tax Credit: Snapshot versus Time-Exposure Incidence

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Author Info

  • Rosanne Altshuler

    ()
    (Rutgers University, Department of Economics)

  • Amy Ellen Schwartz

    (New York University)

Abstract

We evaluate the progressivity of the federal child care tax credit using the Ernst and Young/University of Michigan panel of tax return data. Incidence measures are calculated using both annual and "time-exposure" income to measure ability to pay. Both indicate that the benefits of the credit are progressively distributed. Replacing annual with time-exposure income dramatically increases the proportion of the credit received by lower-income taxpayers and yields a more even distribution of benefits across middle- and upper-income taxpayers. Our results suggest that policy-makers should use both income measures to evaluate the credit.

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Bibliographic Info

Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 199416.

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Date of creation: 25 Sep 1996
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Handle: RePEc:rut:rutres:199416

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Keywords: child care tax credit; progressivity;

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References

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  1. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
  2. Dunbar, Amy & Nordhauser, Susan, 1991. "Is the Child Care Credit Progressive?," National Tax Journal, National Tax Association, vol. 44(4), pages 519-28, December.
  3. H. Chernick & A. Reschovsky, . "Is the gasoline tax regressive?," Institute for Research on Poverty Discussion Papers 980-92, University of Wisconsin Institute for Research on Poverty.
  4. Lyon, Andrew B & Schwab, Robert M, 1995. "Consumption Taxes in a Life-Cycle Framework: Are Sin Taxes Regressive?," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 389-406, August.
  5. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, May.
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Cited by:
  1. William M. Gentry & Alison P. Hagy, 1995. "The Distributional Effects of the Tax Treatment of Child Care Expenses," NBER Working Papers 5088, National Bureau of Economic Research, Inc.
  2. DUCLOS, Jean-Yves, 1995. "Economic Isolation, Inequality, and the Suits Index of Progressivity," Cahiers de recherche 9510, Université Laval - Département d'économique.
  3. Duclos, Jean-Yves, 1998. "Social evaluation functions, economic isolation and the Suits index of progressivity," Journal of Public Economics, Elsevier, vol. 69(1), pages 103-121, July.

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