scholarly journals The Dual Benefits Of Tax Credits: Taxpayer Income Generation And Economy Stimulus

2010 ◽  
Vol 3 (6) ◽  
pp. 37-40
Author(s):  
Robin Guerrero ◽  
Theresa Tiggeman ◽  
Tracie Edmond
Keyword(s):  
Income Tax ◽  
Local Economy ◽  
Tax Credits ◽  
Tax Credit ◽  
Lower Income ◽  
Economic Stability ◽  
Local Economies ◽  
The Past ◽  
Federal Income Tax ◽  
Child Tax Credit

Two important provisions of the Internal Revenue Code were the creation of the Earned Income Tax Credit and Child Tax Credit. Each of these credits were designed to reduce the amount of tax owed, thereby offsetting some of the increases in living expenses and federal income tax. For many this results in a smaller a tax liability. For others with little or no tax liabilities, the credit can result in a significantly increased refund. Many organizations such as the Volunteer Income Tax Income (VITA) Program, AARP and other similar organizations, cater to assisting these individuals. This is primarily due to the benefits that come from these credits which not only affect these individuals and their families but also the local economies. Larger refunds result in greater sustainability of taxpayer economic stability as well as an ongoing stimulation to the local economy. The purpose of this presentation is to describe the results of a study conducted involving the examination of each of these credits in relation to the taxpayer’s Adjusted Gross Income (AGI). The goal of this study was to demonstrate the importance of these credits as to how they benefit the lower income taxpayers. The study examined various taxpayers who qualified for the credits over the course of the past three years. The results demonstrated that roughly 20% to 25% of these taxpayers’ annual income is attributed to the assistance provided through these credits. Therefore, the need for the continuance of these credits is not only crucial for the welfare of the lower taxpayers but for stimulating the economy as well.

Child Tax Credit in Divorced Families

2009 ◽  
Vol 7 (1) ◽  
pp. 90-98
Author(s):  
Valrie Chambers ◽  
Anthony P. Curatola
Keyword(s):  
Tax Planning ◽  
Tax Credit ◽  
Earned Income ◽  
Divorced Families ◽  
Dependent Care ◽  
The Past ◽  
Head Of Household ◽  
Federal Income Tax ◽  
The Cost ◽  
Child Tax Credit

ABSTRACT: For more than 50 years, Congress has responded to the needs of families with various tax breaks ranging from exemptions, the adoption of Head of Household status, Child and Dependent Care Credit, increased Earned Income Credit (EIC) for those with dependent children, and the Child Tax Credit. With so many different tax breaks, tax planning for divorced parents has been dynamic and at times confusing. Part of the confusion originates from the intent of the special tax rules for divorced couples, divorce decrees, and federal income tax laws. This confusion was exacerbated with the passage of the Child Tax Credit, which is intended to aid parents in the cost of raising a child. Yet, Congress tied the tax credit to the dependency exemption and not to the person who actually cares for the child of divorced or separated parents. Although Congress has tinkered with this policy over the past few years, they still have failed to fix the problem. In fact, we contend that this latest round of legislation has increased the likelihood of additional litigation between former spouses.

Moving Forward with the Earned Income Tax Credit and Child Tax Credit: Analysis of Proposals to Expand Refundable Tax Credits

2020 ◽  
Vol 73 (4) ◽  
pp. 1163-1186
Author(s):  
Elaine Maag ◽  
Nikhita Airi
Keyword(s):  
Low Income ◽  
Income Tax ◽  
Large Scale ◽  
The Elderly ◽  
Earned Income Tax Credit ◽  
Tax Credits ◽  
Tax Credit ◽  
Earned Income ◽  
Low Income Children ◽  
Child Tax Credit

Policymakers grapple with the related issues of unequal incomes, relatively poor health, education, and economic outcomes for low-income children, and hardship among low- and moderate-income families. Refundable tax credits provide substantial support and relief to many. This analysis details who benefits from the earned income tax credit (EITC) and the child tax credit (CTC) and four large-scale tax credit proposals that would provide substantial and ongoing benefits through these or similar credits. Broadly, proposals focused on children exclude childless adults and the elderly, and proposals focused on work exclude nonworkers, including most of the elderly, but include many workers with children.

scholarly journals THOSE WHO KNOW, THOSE WHO DON'T, AND THOSE WHO KNOW BETTER: BALANCING COMPLEXITY, SOPHISTICATION, AND ACCURACY ON TAX RETURNS

2014 ◽  
Vol 11 (1) ◽  
pp. 113
Author(s):  
Michelle Lyon Drumbl
Keyword(s):  
Low Income ◽  
Income Tax ◽  
Tax Credits ◽  
Social Benefits ◽  
Tax Credit ◽  
Poverty Measure ◽  
Tax Returns ◽  
Federal Income Tax ◽  
Eligibility Requirements ◽  
The Right

Refundable credits, particularly the earned income tax credit (EITC) and the child tax credit, serve an important anti-poverty measure for low-income taxpayers.  Annually, millions of taxpayers who do not owe any federal income tax must file a tax return in order to claim these credits that are in the nature of social benefits.  The eligibility requirements for refundable credits are complex, and these returns are particularly prone to audit: EITC audits comprise one-third of all individual income tax audits.  Because of the large dollar amounts at stake, a taxpayer’s mistaken understanding of the eligibility requirements for these refundable credits can often result in a deficiency of several thousand dollars. Though studies indicate that taxpayer error is more commonly inadvertent than intentional, the section 6662 20% accuracy-related penalty applies once the deficiency reaches a statutory “understatement” threshold; it is imposed computationally and without regard to the taxpayer’s intent. By statute, taxpayers have the right to contest the accuracy-related penalty by demonstrating that there was reasonable cause for the underlying error and the taxpayer acted in good faith. Treasury regulations provide that such a circumstance might include “an honest misunderstanding of fact or law that is reasonable in light of all the facts and circumstances, including the experience, knowledge, and education of the taxpayer”.  Yet for all of these reasons – lack of experience, lack of knowledge, and relative lack of education – the taxpayer is unlikely to have the knowledge or resources to raise the very defense that is meant to protect an unsophisticated taxpayer. Drawing comparisons between refundable tax credits and social programs administered by other agencies, this article calls upon the IRS to better differentiate between inadvertent error (“those who don’t know”) and intentional or fraudulent error (“those who know better”).  The article argues that the current accuracy-related penalty approach is unduly punitive.  It concludes by proposing solutions that the IRS might consider in light of Congress’s desire for the Service to administer these social benefits through the Internal Revenue Code.

The Earned Income Tax Credit

2019 ◽  
Vol 686 (1) ◽  
pp. 180-203 ◽  
Author(s):  
Hilary Hoynes
Keyword(s):  
Low Income ◽  
Income Tax ◽  
Earned Income Tax Credit ◽  
Economic Effects ◽  
Tax Credit ◽  
Earned Income ◽  
History Of ◽  
Federal Income Tax ◽  
The Life Course ◽  
Child Tax Credit

In this article, I review the most prominent provision of the federal income tax code that targets low-income tax filers, the Earned Income Tax Credit (EITC), as well as the structurally similar Child Tax Credit and Additional Child Tax Credit. I discuss the programs’ goals: distributional, promoting work, and limiting administrative and compliance costs. The article reviews the history of the programs, the predicted economic effects, and what is known about program impacts and distributional consequences. I conclude that the EITC effectively targets low-income households and is efficient in reducing poverty while encouraging work and that increases in after-tax household incomes lead to improved outcomes over the life course for children of those households. I propose reforms to the program, including policies that expand the generosity of the credit and increase take-up, as well as structural reforms that include spreading benefits throughout the year and reducing reliance on paid tax preparers.

Canada

2018 ◽  
Author(s):  
Joshua T. McCabe
Keyword(s):  
Income Tax ◽  
Child Poverty ◽  
Tax Credits ◽  
Primary Method ◽  
Tax Relief ◽  
The Us ◽  
Cash Benefits ◽  
Child Tax Credit ◽  
Family Allowances ◽  
Initial Change

Chapter 4 examines how Canadian policymakers’ renewed promise to tackle child poverty translated into the Child Tax Benefit, the nonrefundable Child Tax Credit, and the Working Income Tax Benefit. Whereas the logic of tax relief served as the springboard for fiscalization in the US, the logic of income supplementation drove the process in Canada. This difference had important implications for the shape and scope of Canadian tax credits, enabling them to significantly reduce child poverty relative to the much weaker outcomes in the US. Family allowances offered policymakers an alternative to welfare as the primary method of delivering cash benefits to children. Canadian policymakers, including conservative policymakers and profamily groups, saw expanding child tax credits as a way to “take children off welfare” by redirecting benefits through a nonstigmatizing program. The initial change occurred under the Progressive Conservatives in 1992 and was consolidated under the Liberals in 1997.

Indirect Aid to the Arts

1984 ◽  
Vol 471 (1) ◽  
pp. 132-143
Author(s):  
MICHAEL O'HARE ◽  
ALAN L. FELD
Keyword(s):  
Local Governments ◽  
Income Tax ◽  
Property Tax ◽  
Government Support ◽  
Tax Credits ◽  
Best Interests ◽  
The Public ◽  
The Arts ◽  
Federal Income Tax ◽  
Tax Deductions

Most government support of arts institutions is indirect—the result of charitable deduction provisions of the federal income tax, property tax exemptions extended by local governments, and other tax provisions. The money that government forgoes through these provisions must be made up by higher taxes for all taxpayers. The public, however, has little say about how these funds are spent. By its very nature, the income tax deduction places the decision-making power over arts institutions in the hands of those with high incomes. Those with high incomes receive a greater tax benefit for each dollar they contribute, increasing the amounts they donate, which increases the likelihood of their influence over those who run arts institutions, and they are allowed to place restrictions on the use of their gifts. Moreover the property tax exemption encourages arts institutions to invest heavily in real estate, which is not necessarily in the public's best interests. Replacing some indirect subsidies with direct subsidies and granting tax credits for donations in place of tax deductions would go a long way toward making the system more equitable.

The United States

2018 ◽  
Author(s):  
Joshua T. McCabe
Keyword(s):  
Child Poverty ◽  
The United States ◽  
Tax Credits ◽  
National Commission ◽  
Tax Credit ◽  
Tax Relief ◽  
The Us ◽  
The Uk ◽  
Poor Children ◽  
Child Tax Credit

Chapter 6 looks at how the National Commission on Children brought attention to the problem of child poverty in the US, leading to the expansion of the Earned Income Tax Credit in 1993 and the introduction of the nonrefundable Child Tax Credit in 1997. In contrast to the cases of Canada and the UK, the growth of these tax credits, tracing their legacy to the dependent exemption in the tax system, was premised on the logic of tax relief rather than the logic of income supplementation. Originally, the National Commission on Children released recommendations for a fully refundable Child Tax Credit as the best way to tackle child poverty. This served as a successful springboard in Canada and the UK. This was not the case in the US, where the logic of tax relief remained dominant. Initial attempts to introduce a fully refundable Child Tax Credit quickly failed. Policymakers and the public deemed poor children undeserving of tax credits because their parents were not technically taxpayers.

The Changing Impact of the Alternative Minimum Tax on Horizontal Equity

2008 ◽  
Vol 8 (1) ◽  
pp. 39-65 ◽  
Author(s):  
Peter J. Westort
Keyword(s):  
Low Income ◽  
Income Tax ◽  
Horizontal Equity ◽  
Lower Income ◽  
Tax System ◽  
Rank Reversal ◽  
Income Groups ◽  
Federal Income Tax ◽  
The Impact ◽  
Income Taxpayers

While prior research (Anderson 1985, 1988) indicates that the Alternative Minimum Tax (AMT) increases the fairness, or horizontal equity (HE), of the federal income tax system, changes in tax laws and the general inability of the AMT system to account for inflation raise serious questions about whether the AMT continues to increase fairness. Burman et al. (2002) observe that the reason many more taxpayers are now subject to the AMT is because of the increasing divergence of the regular tax and the AMT. This divergence subjects more lower-income taxpayers to the AMT, thus resulting in higher total tax liability. Using individual income tax return data for 1992, 1995, and 2000, and both dispersion-based and rank reversal-based measures, this study observes that the AMT still increases HE in many upper income groups, but decreases HE in many lower income groups. Moreover, overall measures of HE indicate that the AMT has a net decreasing effect on HE. There are two implications to these findings. First, it can no longer be assumed that the AMT uniformly improves HE. Second, the AMT generally continues to achieve its intended result at the upper income levels. This result suggests that regulators and legislators wishing to improve the AMT system need to address the causes of low-income taxpayers being subject to the AMT while maintaining the impact on upper income taxpayers.

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