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

Author

Listed:
  • 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.

Suggested Citation

  • Rosanne Altshuler & Amy Ellen Schwartz, 1996. "On the Progressivity of the Child Care Tax Credit: Snapshot versus Time-Exposure Incidence," Departmental Working Papers 199416, Rutgers University, Department of Economics.
  • Handle: RePEc:rut:rutres:199416
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    References listed on IDEAS

    as
    1. H. Chernick & A. Reschovsky, "undated". "Is the gasoline tax regressive?," Institute for Research on Poverty Discussion Papers 980-92, University of Wisconsin Institute for Research on Poverty.
    2. 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.
    3. Dunbar, Amy & Nordhauser, Susan, 1991. "Is the Child Care Credit Progressive?," National Tax Journal, National Tax Association, vol. 44(4), pages 519-28, December.
    4. Dunbar, Amy & Nordhauser, Susan, 1991. "Is the Child Care Credit Progressive?," National Tax Journal, National Tax Association;National Tax Journal, vol. 44(4), pages 519-528, December.
    5. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, March.
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    Cited by:

    1. 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.
    2. Duclos, J.Y., 1995. "Economic Isolation, Inequality, and the Suits Index of Progressivity," Papers 9510, Laval - Recherche en Politique Economique.
    3. William M. Gentry & Alison P. Hagy, 1996. "The Distributional Effects of the Tax Treatment of Child Care Expenses," NBER Chapters, in: Empirical Foundations of Household Taxation, pages 99-134, National Bureau of Economic Research, Inc.
    4. Elin Halvorsen & Thor O. Thoresen, 2021. "Distributional Effects of a Wealth Tax under Lifetime‐Dynastic Income Concepts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 184-215, January.
    5. Dickert–Conlin, Stacy & Fitzpatrick, Katie & Hanson, Andrew, 2005. "Utilization of Income Tax Credits by Low–Income Individuals," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(4), pages 743-785, December.
    6. Ann Dryden Witte & Marisol Trowbridge, 2005. "The Structure of Early Care and Education in the United States: Historical Evolution and International Comparisons," NBER Chapters, in: Tax Policy and the Economy, Volume 19, pages 1-38, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    child care tax credit; progressivity;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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