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

Jane Gravelle and Jennifer Gravelle

National Tax Journal, 2006, vol. 59, issue 3, 631-49

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.

Date: 2006
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