It should be pointed out that we get into these problems of high marginal tax
rates and rapid phase-outs because unlike every other country, we try to support
families indirectly through the tax code rather than directly through universal
family/children allowances. If we are going to spend $85 billion, I'd much
rather spend it that way.
Joel Blau
Max B. Sawicky wrote:
> . . .
> > The problem is if you want to do an earned income tax
> > credit (or a negative income tax), the more you give, the
> > more you have to take away, and the higher the implicit
> > marginal tax rate must be in the take-away zone.
> > If you want a low marginal rate at the bottom, you must
> > dispense with income support down there.
>
> You don't have to take anything away if you just get rid of the phaseout
> altogether. The EITC credit is worth about $1620 per child. With about 70
> >>>>>>>>>>>
>
> Top benefits for one child is $2312 and for two $3816.
> If you gave every child $1620 you would cut benefits for
> a lot of families. As I said, if you want to give more,
> you have to take away more.
>
> As the resident wild man of Washington, even I have to
> blanch at a proposal to spend an extra $85 billion a
> year on one thing.
>
> >>>>>>>>> . . .
> million children, that means it would cost around $115 billion per year to
> extend the credit to every child. Given the money we are already spending
> on EITC (about $30 billion), and since there is already the $500 per child
> credit, that takes out about a third of the rest of the cost. One solution
> without spending much more money would be to convert the deductions for
> children into pure credits, which would eliminate the advantages for high
> marginal tax rate people from the deduction - redistributing the money
> downwards by income.
>
> And of course, it could be phased out gradually at higher-income levels at a
> slower rate. The point is to have no phase-out in a zone of people who
> should be facing no taxes at all.
>
> Now, in the ideal, we would raise taxes on the wealthy to pay for the whole
> deal.
>
> So what is the proposal you are working on at EPI?
> -- Nathan Newman
> >>>>>>>>>>>>>>>>>>>
>
> It resembles what you have described.
> We'll show our cards on April 15.
> I can assure you we aren't going
> to be calling for any tax increase,
> what with a $4 trillion surplus
> staring us in the face.
>
> mbs
