Simplicity: Considerations in Designing a Unified Child Credit

Research Report

Simplicity: Considerations in Designing a Unified Child Credit

November 22, 2010

Abstract

Complexity plagues the tax code for low-income families, particularly with regard to child related credits. Many analysts advocate separating out the essential functions of these credits: subsidizing work, subsidizing children, and subsidizing specifi c activities such as child care. This paper analyzes design considerations in creating a unifi ed child credit and offers options for reforms that range from a complete overhaul of the child and work incentives to a more minor consolidation of highly related tax incentives. Either could form the foundation for reform efforts aimed at simplifying and rationalizing the federal income tax code with respect to children.

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