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Horizontal Equity and Family Tax Treatment: The Orphan Child of Tax Policy

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  • Gravelle, Jane
  • Gravelle, Jennifer

Abstract

Horizontal equity across families has played little role in forming tax policy. Using an index to equate different families, the earned income credit (EIC) is shown to create dramatic effective tax rate differentials at low incomes, favoring families with two children. In the middle, the child credit favors large families. At high incomes, families without children are favored slightly. Tax revisions reducing these inequities include increasing the EIC for singles and childless couples, repealing the alternative minimum tax, eliminating phase outs, and eliminating or reducing the child credit. Making the child credit fully refundable would magnify inequities.

Suggested Citation

  • Gravelle, Jane & Gravelle, Jennifer, 2006. "Horizontal Equity and Family Tax Treatment: The Orphan Child of Tax Policy," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(3), pages 631-649, September.
  • Handle: RePEc:ntj:journl:v:59:y:2006:i:3:p:631-49
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    Cited by:

    1. Plummer, Elizabeth, 2010. "Evidence on the Distributional Effects of a Land Value Tax on Residential Households," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(1), pages 63-92, March.
    2. Alessandro Balestrino, 2012. "Family Taxation, Fertility, and Horizontal Equity: A Political Economy Perspective," CESifo Working Paper Series 3774, CESifo Group Munich.
    3. Bönke, Timm & Eichfelder, Sebastian & Utz, Stephen, 2012. "Uneven treatment of family life? Horizontal equity in the U.S. tax and transfer system," Discussion Papers 2012/18, Free University Berlin, School of Business & Economics.

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