Tax Credits
Tax Policy Matters to Kids and Their Families
Tax economist Eugene Steuerle has rightly pointed out that, “the tax system affects almost every area of a family’s life.” From determining a parent's take home pay to providing support for child care, federal tax policy has a profound impact on family life. Indeed, in many ways, federal tax policy is at least as important to families and children as most other laws and government programs.
While the total impact of federal tax policy is, of course, wide ranging, three specific provisions stand out as being the most important when it comes to families with children.
The first of these provisions is the standard personal exemption, which allows taxpayers to deduct a set amount from their taxable income for each child they have. The second is the Earned Income Tax Credit (EITC), which provides a fully refundable tax credit to low-income taxpayers based both on how much income they earn and on how many children they have. Third, there is the Child Tax Credit, a partly refundable credit of $1,000 for each child. Together, these three provisions amount to over $100 billion for families. There are other smaller provisions that also impact and relate to children, but the standard exemption, the EITC and the Child Credit form the basis of the tax system as it relates to children.
Please click on the links below for additional information on each of these policies.
