TAILIEUCHUNG - The Effect of the 2001 Tax Cut on Low- and Middle-Income Families and Children

Over the years, the EITC has played different tax policy, labor market, and antipoverty roles. In section , we review the political history of the EITC, its rules, and its goals, and we provide a broad set of program sta- tistics that summarize its growth and coverage. Various goals of the pro- gram occasionally come into conflict. For example, when the EITC was in- creased as part of the 1993 budget bill, it was singled out as an important antipoverty program that has positive (relative to alternatives) labor mar- ket incentives. Around the same time, however, studies of EITC noncom- pliance suggested that the credit was difficult for. | The Effect of the 2001 Tax Cut on Low- and Middle-Income Families and Children Len Burman Elaine Maag and Jeff Rohaly April 2002 Len Burman is a senior fellow and Elaine Maag and Jeff Rohaly are research associates at the Urban Institute. We gratefully acknowledge the helpful comments of Bill Gale Eric Toder and Sheila Zedlewski and the financial support of both the Ford Foundation and the George Gund Foundation. The historical analysis of tax rates in tables 6-8 was conducted by Dr. Toder before he left the Urban Institute supported by a grant from the Smith Richardson Foundation. John O Hare and Frank Sammartino developed the first version of the Urban-Brookings Tax Policy Center Microsimulation Model. Deborah Kobes provided expert research assistance. The views expressed are those of the authors and do not necessarily reflect those of the Urban Institute its board or its funders. The Tax Policy Center TPC aims to clarify and analyze the nation s tax policy choices by providing timely and accessible facts analyses and commentary to policymakers journalists citizens and researchers. TPC s nationally recognized experts in tax budget and social policy carry out an integrated program of research and communication on four overarching issues fair simple and efficient taxation long-term implications of tax policy choices social policy in the tax code and state tax issues. A joint venture of the Urban Institute and the Brookings Institution support for the TPC comes from a generous consortium of funders including the Ford Foundation the Annie E. Casey Foundation and the George Gund Foundation. Views expressed do not necessarily reflect those of the Urban Institute the Brookings Institution their board of trustees or their funders. ABSTRACT The 2001 tax cut has been roundly criticized because so much of the benefit goes to the rich but the bill also did much to help low- and middle-income families. Most notably it increased the child tax credit and made it refundable that

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