Reforming Tax Incentives Into Uniform Refundable Tax Credits
Each year the US federal individual income tax delivers over $500 billion worth of tax incentives intended to encourage socially beneficial activities. Currently the vast majority operate through deductions or exclusions, which link the size of the subsidy to the taxpayer's marginal tax bracket. This article argues that uniform refundable credits are a more efficient approach for tax incentives intended to correct for positive externalities, absent evidence that positive externalities exist or that externalities or elasticities associated with the subsidized activity vary by income class. Moreover, some type of refundable credit should almost always be the most efficient subsidy even if externalities or elasticities rise with income. Their efficiency benefits are further magnified by their tendency to automatically smooth household income and macroeconomic demand. This article thus proposes a dramatic change in how the government provides tax incentives for socially valued activities: the default for all such tax incentives should be a uniform refundable tax credit.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 2 (2008)
Issue (Month): 2 (January)
|Contact details of provider:|| Web page: https://www.degruyter.com|
|Order Information:||Web: https://www.degruyter.com/view/j/bis|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dowd, Timothy, 2005. "Distinguishing Between Short-Term and Long–Term Recipients of the Earned Income Tax Credit," National Tax Journal, National Tax Association, vol. 58(4), pages 807-828, December.
- Ann Huff Stevens, 1995. "Long-Term Effects of Job Displacement: Evidence from the Panel Study of Income Dynamics," NBER Working Papers 5343, National Bureau of Economic Research, Inc.
- Alan J. Auerbach, 2002. "Is there a role for discretionary fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 109-150.
When requesting a correction, please mention this item's handle: RePEc:bpj:bistud:v:2:y:2008:i:2:n:8. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.