TY  - JOUR
AU  - Ellwood, David T
AU  - Liebman, Jeffrey B
TI  - The Middle Class Parent Penalty: Child Benefits in the U.S. Tax Code
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8031
PY  - 2000
Y2  - December 2000
DO  - 10.3386/w8031
UR  - http://www.nber.org/papers/w8031
L1  - http://www.nber.org/papers/w8031.pdf
N1  - Author contact info:
David T. Ellwood
John F. Kennedy School of Government
Harvard University
79 JFK Street
Cambridge, MA 02138
Tel: 617/495-1121
Fax: 617/496-9053
E-Mail: david_ellwood@harvard.edu

Jeffrey B. Liebman
John F. Kennedy School of Government
Harvard University
79 JFK Street
Cambridge, MA 02138
Tel: 617/495-8518
Fax: 617/496-9053
E-Mail: jeffrey_liebman@harvard.edu
M1  - published as David T. Ellwood, Jeffrey B. Liebman. "The Middle-Class Parent Penalty: Child Benefits in the U.S. Tax Code," in James M. Poterba, editor, "Tax Policy and the Economy, Volume 15" MIT Press (2001)

AB  - Low-income families with children receive large tax benefits from the Earned Income Tax Credit, while high income taxpayers receive large tax benefits from dependent exemptions (whose value is greater to those in higher tax brackets).  In contrast, middle-income parents receive substantially smaller tax benefits associated with children.  This U-shaped pattern of benefits by income, which we call the  middle-class parent penalty,' not only raises issues of fairness; it also generates marginal tax rates and marriage penalties for moderate income families that are as high or higher than those facing more well-to-do taxpayers.  This paper documents how the tax benefits of children vary with income, and illustrates their impact on marginal tax rates and marriage penalties.  It then examines five options for reducing or eliminating the middle-class parent penalty and the high marginal tax rates and marriage penalties it produces.
ER  -