Since its initial enactment in 1975, Congress has beefed up support for low- and moderate-income workers through the earned income tax credit (EITC), but it has largely excluded childless workers and married couples with two earners. One proposal to rectify this situation would expand a very small credit for childless workers back to the temporary level it attained for one year in 2021 under the American Rescue Plan Act (ARPA). Researchers from left to right to center— the
It is not clear to me how you are measuring the marriage penalty. Is it just by the difference before and after marriage in the EITC? I usually think about the EITC in terms of the effective marginal tax rates and what income or hours at work there is a spike in the marginal tax rate. (Is there an income at which working one more hour causes a decrease in after tax income?) But do the federal tax rates matter for this issue under current federal tax law with a combined personal exemption of 27,000 dollars and 2,000 dollar tax credits for a child?
Sadly, there are tradeoffs throughout the tax code regarding marriage penalties. To avoid a marriage penalty in the EITC, Congress would need to double the income limit for married couples, much as it does for many other elements in the code. In that case, a single earner with the same income as a married couple is disadvantaged relative to the couple. But perhaps that is less troubling for a provision trying to promote earnings among those with low incomes.
It is not clear to me how you are measuring the marriage penalty. Is it just by the difference before and after marriage in the EITC? I usually think about the EITC in terms of the effective marginal tax rates and what income or hours at work there is a spike in the marginal tax rate. (Is there an income at which working one more hour causes a decrease in after tax income?) But do the federal tax rates matter for this issue under current federal tax law with a combined personal exemption of 27,000 dollars and 2,000 dollar tax credits for a child?
Sadly, there are tradeoffs throughout the tax code regarding marriage penalties. To avoid a marriage penalty in the EITC, Congress would need to double the income limit for married couples, much as it does for many other elements in the code. In that case, a single earner with the same income as a married couple is disadvantaged relative to the couple. But perhaps that is less troubling for a provision trying to promote earnings among those with low incomes.