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 refundablethat is, available to families with incomes too low to owe income tax. The legislation also simplified the EITC and increased it for some married couples. It increased the maximum child care tax credit, created a new 10 percent tax bracket, and raised the standard deduction for married couples, all of which will provide substantial benefit to middle-income families. Like the rest of the tax bill, many of these provisions phase in very slowly, and inflation erodes away much of the value of the advertised increases. Nonetheless, when fully phased in, the tax cuts will be worth over $1,700 per year in tax savings for a family of four at or near the poverty line, and over $1,000 for a family at twice the poverty level. Families with children do better than those without at almost every income level. The exception is upper-middle income families whose benefits are curtailed or eliminated by the alternative minimum tax. And, not surprisingly, the largest overall tax cuts by far will accrue to those with incomes over $200,000. [View the press release]
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