Office of Tax Analysis

Working Paper 112

November 2016

Tax Support for Families with Children:

Key Tax Benefits, Their Impact on Marginal and 

Average Tax Rates, And an Approach to Simplification

2017 Law

Deena Ackerman, Michael Cooper

Rachel Costello, & Patricia Tong

The OTA Working Papers Series presents original research by the staff of the Office of Tax

Analysis. These papers are intended to generate discussion and critical comment while

informing and improving the quality of the analysis conducted by the Office. The papers are

works in progress and subject to revision. Views and opinions expressed are those of the authors

and do not necessarily represent official Treasury positions or policy. Comments are welcome,

as are suggestions for improvements, and should be directed to the authors. OTA Working

Papers may be quoted without additional permission. 
2

TAX SUPPORT FOR FAMILIES WITH CHILDREN:

KEY TAX BENEFITS, THEIR IMPACT ON MARGINAL AND AVERAGE 

TAX RATES, AND AN APPROACH TO SIMPLIFICATION

2017 LAW

November 2016

Deena Ackerman1, Michael Cooper2,

Rachel Costello3, & Patricia Tong4

The tax code provides several different benefits to families with children. As a result of these 

benefits, taxpayers with dependent children pay lower federal income taxes than similar families 

without children, and many receive substantial refunds. This paper describes these benefits and 

their effect on the taxes of the families who receive them in a series of tables and figures. The 

tables and figures show how the provisions interact to affect the final tax liability of the families 

benefitting from them. After illustrating ways that the current law provisions are complicated, 

paper presents an alternative set of credits that could replace the main current law benefits with 

an aim toward simplifying the tax benefits for families. This exercise shows one way that 

consolidating and simplifying tax benefits could be achieved. However, the exercise also 

demonstrates that simplification is not possible without imposing a tax increase on some families 

or by reducing income tax revenue.

Keywords: Earned Income Tax Credit, Child Tax Credit Marginal Tax Rates, Simplification

JEL Codes: H22, H25

 

1 Deena Ackerman: Office of Tax Analysis, U.S. Department of the Treasury, Deena.Ackerman@treasury.gov. 

2 Michael Cooper: Office of Tax Analysis, U.S. Department of the Treasury, Michael.Cooper@treasury.gov. 

3 Rachel Costello: Office of Tax Analysis, U.S. Department of the Treasury, Rachel.Costello@treasury.gov. 

4

Patricia Tong: Office of Tax Analysis, U.S. Department of the Treasury, Patricia.Tong@treasury.gov. 
Introduction

The tax code provides several different benefits to families with children. As a result of 

these benefits, taxpayers with dependent children pay lower federal income taxes than similar 

families without children, and many receive substantial refunds. This paper describes these 

benefits and their effect on the taxes of the families who receive them. 

The first section of the paper describes the main provisions that support families with 

children with a focus on the main personal credits5and presents tables showing the distribution 

of each benefit by adjusted gross income. The second section of the paper presents figures that 

show the marginal and average tax rates6faced by typical families with different incomes who 

claim child-related benefits. The amount of tax support provided to the family due to the 

presence of the dependent child is also shown. The third section presents a simplified set of 

credits that would replace the benefits described in the previous two sections. This exercise

demonstrates how consolidating and simplifying the family related tax provisions cannot be 

achieved without imposing a tax increase on some families or reducing income tax revenue. The 

fourth section concludes.

Section 1: Description and Analysis of the Main Tax Provisions Supporting Families with 

Children.

The main provisions that provide support to families with children are the dependency 

exemption, the opportunity for unmarried individuals with children to file as a head of 

household, and a set of targeted personal credits. Except where noted, parameters are indexed for 

inflation, and the estimated values for tax year 2017 are provided. Estimated benefits and counts 

of families receiving benefit are for tax year 2017.

7

The definition of a qualifying child varies across the different tax provisions. In 

particular, the support test, which requires that a child not provide more than half of his own 

support, is only required for a subset of tax provisions. In addition, the age restriction varies 

across the tax provisions and only the Earned Income Tax Credit (EITC) requires the child to 

 

5

Some analysis of the education credits is included in this paper because a large share of the benefits claimed is on 

behalf of dependent children. For a more detail about the tax benefits for education, see Tax Expenditures for 

Education in this series.

6 The marginal tax rate is the change in tax caused by an additional unit of income. The average tax rate is total taxes 

as a proportion of income.

7 Throughout this paper, taxpayers are considered to benefit from a provision (or set of provisions) if they pay at 

least five dollars less in taxes than they would have paid in absence of the provision (or set of provisions).
2

have a Social Security Number (SSN). For all the provisions discussed below, the child is 

required to satisfy a relationship and residency test. 8These eligibility criteria are summarized in 

Appendix Table A1.

Personal exemptions. Taxpayers may claim an exemption of $4,100 for each taxpayer and for 

each dependent child or dependent relative supported by the taxpayer. The exemptions lower the 

amount of income subject to tax, and therefore the amount of tax owed. A dependent child is a 

child under age 19 or under 24 if attending school full-time for at least five months of the year; 

there is no age limit for a child who is permanently disabled. In general, the child must reside 

with the taxpayer, and must not be supporting herself.

9

Subject to additional credit-specific 

requirements, dependent children are qualifying children for all of the family benefits discussed 

in this paper.

10 The personal exemptions phase out at incomes in excess of $262,200 (single 

filers), $288,400 (head of household filers), and $314,650 (joint filers). Table 1 shows the 

distribution of the benefit to families from being able to claim an exemption for dependent 

children by adjusted gross income (AGI). An estimated 38.5 million families receive $43 billion 

in benefits with an average benefit of $1,116. Because the value of the personal exemption is 

increasing with the taxpayer’s marginal tax rate, it is increasing with income. Families earning 

less than $50,000 receive an average benefit of $697 and families earning more than $100,000 

receive an average benefit of $1,736.

Head of household filing status. Unmarried taxpayers who maintain a home for a dependent 

child may be eligible to file as a head of household, instead of as a single filer. 11 Head of 

household status has a higher standard deduction and income is taxed under a separate rate 

structure that is more generous than the rate structure available to single filers. Table 2 shows the 

 

8 The relationship test states that the child must be the taxpayers, son, daughter, stepchild, foster child, brother, 

sister, stepbrother, stepsister, or a descendant of any of these individuals to qualify the taxpayer for the dependent 

exemption, child tax credit, and EITC. The residency test requires the child to reside with the taxpayer for at least 

half the year to be claimed for the dependent exemption, the child and dependent care tax credit, the child tax credit, 

and the EITC.

9 Temporary absences (e.g. to attend school) do not count as time away and there are special rules for parents who 

are separated or divorced.

10 A dependent relative may be any age, but must have income less than the exemption amount and must be 

supported by the taxpayer. A dependent relative may qualify the taxpayer for a CDCTC and/or head of household 

status but otherwise will not affect the taxpayer’s eligibility for the benefits discussed in this paper.

11 In certain cases, a married taxpayer with children may be considered unmarried for tax purposes – the taxpayer 

must live apart from his or her spouse for the last six months of the year, be maintaining the household where the 

children reside for more than half the year, and be able to claim the children as dependents.
3

distribution of the benefit of head of household filing status by AGI.

12 An estimated 14.3 million 

families receive $9.6 billion in benefits with an average benefit of $669. As with the personal 

exemption, the value of head of household filing status rises with marginal tax rates. As a result, 

the average tax support from head of household filing status increases with income: heads of 

household with $50,000 in income or less receive an average benefit of $416 while returns with 

at least $100,000 of income receive an average benefit of $1,846. Although the average benefit is 

greater among higher income families, most families benefitting from head of household status 

are low-income. In particular, 9.6 million families with AGI below $50,000 benefit from the 

head of household filing status out of a total of 14.3 million families that benefit. 

Child credit (CTC) and additional child tax credit (ACTC). Taxpayers may be eligible for a 

partially refundable child credit of $1,000 for each dependent child under age 17. In general, the 

child credit is non-refundable, but taxpayers with insufficient tax liability may claim the 

refundable additional child tax credit equal to 15% of earned income in excess of $3,000 up to 

the value of the unused portion of the child credit. The child credit phases out beginning at 

$75,000 ($110,000 for married filers) of modified AGI. None of the CTC or ACTC parameters 

are indexed for inflation. Table 3A shows the distribution of benefits by AGI category for the 

combined CTC and ACTC. Table 3B separately shows the benefits from the refundable portion. 

An estimated 34.8 million families receive $54.3 billion in benefits with an average benefit of 

$1,558. Unlike the dependent exemption and head of household filing status, the benefits of tax 

credits are not increasing in marginal tax rates. In addition, the ACTC is refundable and the CTC 

is phased out for higher-income taxpayers. As a result, the average benefit is about the same for 

taxpayers across the income distribution, except for higher-income families who do not receive 

it; and the CTC and ACTC are progressive, in that their benefit constitutes a greater share of 

after-tax income for lower income families than for other families. An estimated 19.4 million 

families, 55.7% of the total number of families with eligible children, receive at least some of 

their total child credit as a refund. 

 

12 Taxpayers who maintain a home for a dependent relative other than a child may also claim the head of household 

filing status. Table 2 includes a small number of families without children who are maintaining homes for dependent 

relatives. 
4

Earned income tax credit (EITC). Taxpayers may be eligible for a refundable earned income tax 

credit. The credit phases in with earned income, remains constant over a range of earned income, 

and then phases out on the greater of earned income and AGI. The credit begins to phase out at a 

higher income level for married taxpayers to counteract work disincentives faced by the 

secondary earner. The credit is more generous for families with more children.

13,14 Taking the 

one-child case as an example, the credit phases in at a rate of 34% of income up to $10,030 and a 

maximum credit of $3,410. Beginning at $18,390 ($23,990 for joint filers) of income, the credit 

begins phasing down at a rate of 15.98%, phasing out completely at incomes over $39,730

($45,330 for joint filers). The full parameter schedule for all family sizes and marital status is in 

Appendix Table A2. In 2017, the maximum EITC for taxpayers without children is $511 while 

the maximum EITC for taxpayers with three or more children is $6,336. Children may qualify 

the taxpayer for the EITC even if the child is self-supporting so long as the other qualifying 

requirements (relationship, residence, age, and SSN) are met. Table 4 shows the distribution of 

this credit by AGI.15 An estimated 27.2 million families receive $64.3 billion in benefits with an 

average benefit of $2,367. As is obvious from the phaseout and refundability provisions, the 

benefit of the EITC is heavily concentrated at the lower end of the income distribution; no family 

with income greater than $60,000 benefits from the EITC.

Child and dependent care credit (CDCTC). Taxpayers with child care expenses may be eligible 

for a nonrefundable child and dependent care tax credit. The maximum credit is for 35% of up to 

$3,000 of child care expenses for one child and $6,000 for two or more children. The credit rate 

phases down beginning at incomes over $15,000 until it reaches 20% at incomes in excess of 

$43,000. CDCTC parameters are not indexed. The credit is generally available for working 

taxpayers with children under age 13 who are not supporting themselves, but is also available for 

working taxpayers supporting their parents or other dependents needing care. The credit 

parameters and the income limits are not indexed. Table 5 shows the distribution of this credit by 

 

13 There are four different EITC schedules, for those with zero, one, two, and three or more qualifying children.

14 Married taxpayers must file jointly in order to claim the EITC; married filing separately couples are not eligible 

for this credit.

15 Table 4 includes 7.3 million families and individuals who receive a benefit of $2.2 billion in EITC for workers 

who do not claim a qualifying child.
5

AGI.16 An estimated 6.3 million families receive $3.5 billion in benefits with an average benefit 

of $555. This credit provides benefits to families with children at all income levels, although the 

benefit structure is progressive in that benefits fall as a proportion of income as income rises. 

Education credits. Taxpayers with education expenses may be eligible for one of two credits for 

expenses paid on behalf of themselves or their dependent children. Taxpayers may claim an 

American opportunity tax credit (AOTC) of up to $2,500 per student, with up to 40% of the 

credit being refundable. The credit phases out beginning at $80,000 ($160,000 for joint filers) of 

income and is available for four years. To be eligible for the AOTC, the student must attend 

school at least half-time. Taxpayers may also claim a lifetime learning tax credit (LLTC) for 

20% of up to $10,000 of tuition and required fees per year per return. This credit phases out 

beginning at $56,000 ($112,000 for joint filers) of income and is available to part-time students. 

There is no limit on the number of years that a student is eligible for the LLTC. In any given 

year, a taxpayer may only claim one credit for each student in the family for whom there are 

education expenses.17 The phase-out range for the LLTC is indexed. Neither the phase-out range 

for the AOTC nor the other parameters of the AOTC or LLTC are indexed. Although these 

credits are not aimed solely at dependent children, most of the AOTC benefits and a substantial 

share of the LLTC benefits are claimed by parents who paid these expenses on behalf of their 

dependent children. Table 6 shows the distribution of education credits by AGI.18 An estimated 

13.3 million families receive $20.1 billion in benefits with an average benefit of $1,511. Because 

the AOTC does not phase out completely until income hits $90,000 for single filers and 

$180,000 for joint filers, and education expenses tend to rise with income, the education credits 

provide benefits across most of the income distribution. Only those with very high income (e.g., 

AGI above $200,000 in the table) receive no benefit. Nonetheless, the benefits are mildly 

progressive because benefits as a proportion of income are somewhat larger at lower than at 

higher income levels. 

 

16 Table 5 includes a small number of families who have expenses for the care of disabled dependents other than 

their young children.

17 In years prior to 2016, taxpayers may also have chosen to claim a tuition deduction instead of a tuition credit. 

Because this benefit is scheduled to expire at the end of 2016, it is not included in this analysis.

18 Table 6 includes families with qualifying education expenses for themselves as well as for their children.
6

Section 2: Marginal and Average Tax Rates and Tax Support for Families with Children

The amount of income tax owed and tax benefits received at any level of income is 

determined by the interaction of the taxpayer’s income and filing status with the other 

characteristics of the taxpayer’s family. This paper continues with five figures showing the 

marginal and average tax rates faced by five typical family types with different incomes, who are 

claiming child-related tax benefits. For families with children, the total amount of tax support 

provided to the family due to the presence of that dependent is also shown. These figures show 

estimates for 2017.

In order to produce these figures, a number of simplifying assumptions about the families 

were made. First, the examples assume that all income is earned income (e.g., wages) and 

families are only eligible for the benefits listed above. Second, taxpayers may claim a standard 

deduction that varies with filing status or itemize deductions. The examples assume that 18 

percent of family income will be spent on expenses that would qualify for an itemized deduction, 

and that the family itemizes when it is tax beneficial to do so. Because itemized expenses and 

therefore deductions rise with income (at a rate of 18 percent), the marginal tax rate for itemizers 

is reduced by 0.18 times the statutory tax rate. The presentation also includes a simplified

alternative minimum tax which reduces the value of itemized deductions and personal 

exemptions. Other tax provisions (“PEP” and “Pease”) reduce or phase-out the value of personal 

exemptions and itemized deductions, but at higher levels of income than shown on these graphs. 

The figures are illustrative and do not account for the specific circumstances of any actual family 

that would affect their tax liability.19

Figure 1 presents the marginal and average tax rates faced by a single filer. The actual marginal 

tax rate deviates from the statutory marginal rate schedule due to the EITC and itemization. The

EITC decreases the marginal tax rate as the credit phases in, and increases it as the credit phases 

out. Itemization drops the rate of tax on the last dollar earned, as discussed above.

 

19 Marginal tax rates are calculated based on thousand dollar earnings increments, except in Figure 1 which (without 

loss of comparability) uses hundred dollar increments in order to conform to the lower income scale on the 

horizontal axis.
7

Figure 2 presents the marginal and average income tax rates faced by a married filer with one 

dependent child and no child care expenses. The figure also presents the amount of tax support 

the family receives as a result of the child. Key components of the marginal tax rate are the large 

negative tax rates as the EITC and ACTC phase in followed by a high marginal rate as the EITC 

phases out; a drop in the marginal tax rate due to itemizing; a temporary increase in the marginal 

tax rate as the child credit phases out; and a loss of any further tax support on behalf of the child 

as the family enters the alternative minimum tax (AMT) and marginal rates rise slightly. 

Figure 3 repeats Figure 2 for a head of household filer with one dependent child and no childcare 

expenses. The marginal rate graph in Figure 3 shares all of the key features seen in Figure 2, but 

with a less generous underlying statutory marginal rate schedule and lower income levels for 

credit phase-outs. The amount of tax support for this family type includes the added element that 

the child creates eligibility for head of household status, and thus a more generous rate schedule 

than applies to other unmarried taxpayers. The portion of the tax support due to the difference in 

schedules is shown in a lighter shade than the portion due to the remaining child-related 

provisions.

Figure 4 presents the marginal and average tax rates faced by a married filer with a dependent 

student who is assumed to have sufficient education expenses to qualify for the maximum credit. 

The figure also presents the amount of tax support the filer receives as a result of the student. 

Key differences between this figure and Figure 2 are the large initial benefit from the refundable 

portion of the AOTC, which affects tax support but not marginal rates; no eligibility for the child 

credit; and high marginal tax rates as the AOTC phases out.

Figure 5 presents the marginal and average tax rates faced by a head of household filer with one 

dependent child and sufficient child care expenses to qualify for the maximum child and 

dependent care credit. The figure also presents the amount of tax support the filer receives as a 

result of the child. Key differences between this figure and Figure 3 are the higher marginal rates 

for taxpayers earning modest incomes as the child and dependent care credit phases down, and 

the additional benefit from this credit affecting taxpayers at all but the lowest levels of income.
8

Section 3: A Proposal to Simplify the Family Credits 

As described in Section 1, there are multiple tax provisions providing support to families 

with children. This creates complexity because each tax provision has its own unique structure 

and each one targets a different, but overlapping population. This, in turn, results in the 

complicated marginal tax rate schedules and sharp peaks and troughs in the tax support provided 

by income as depicted in Section 2. In addition, the current set of provisions creates work 

disincentives for non-working and lower-earning spouses because the introduction of a second 

earner (or an increase of hours by the second earner) would move the family income into a 

region of higher marginal tax rates.20

Policy makers have long recognized the challenges to tax efficiency that result from the 

policy decision to provide benefits to families through the tax code. Since 2000, there have been 

many calls for reform focusing on simplifying definitions, improving incentives for second 

earners, and consolidating the credits. For example, Holtzblatt and McCubbin (2003) discuss the 

costs and benefits of unifying the definition of a child across the different family-related tax 

provisions. Their work summarizes the policy discussion that ultimately led to the passage of the 

uniform definition of a child included in the Working Families Tax Relief Act of 2004.21 Maag’s 

2010 work on this topic highlights ways that complexity remains even after passage of these 

simplification measures. Maag (2011) and Kearney and Turner (2013) directly address work 

disincentives faced by second earners in families with modest incomes and propose alternatives. 

Finally, the President’s Advisory Panel on Federal Tax Reform (2005) proposes to consolidate 

many of the family related provisions into a work credit and family credit. This basic structure, a 

work-based credit combined with a single family-based credit, has influenced many subsequent 

proposals, including the President’s Economic Recovery Advisory Board (PERAB) report on tax 

reform (2010) and Maag (2015).

In this section of the paper, we demonstrate the difficulty of simplifying the current set of 

tax provisions targeted to families. We present a proposal that captures many of the features 

desired by policy makers to illustrate that simplification cannot be achieved without imposing a 

tax increase on some families and without losing substantial revenue. Like the proposals in the 

 

20 For a more detailed discussion of the income tax treatment of married couples, see the “Income Tax Treatment of 

Married Couples”, U.S. Treasury (2016).

21 Public Law 108-311.
9

President’s Advisory Panel report and the PERAB report, the proposal centers around a 

refundable work credit and a nonrefundable child/dependent credit.

For this exercise, we repeal the personal and dependent exemptions, the head of 

household filing status, the CDCTC, the CTC, the ACTC, and the EITC.

22 These provisions are 

replaced with a non-refundable family credit, a refundable work credit, and a refundable second 

earner credit. The structure of the replacement credits is simpler than the combination of tax 

provisions they replace. Parameters were chosen to provide similar benefits to current law for the 

majority of taxpayers while limiting the number of taxpayers, and in particular moderate income 

taxpayers, who would face large losses relative to current law. The proposal also mitigates work 

disincentives for second earners under current law through the second-earner credit. This 

proposal would be effective for tax years after December 31, 2016 and the parameters for the 

family, work, and secondary earner credits would be indexed for inflation. Overall, the proposal 

would cost $788M over tax years 2017 through 2026, the typical ten-year window used for tax 

revenue analysis. This revenue cost is small since the main goal of this exercise is to maintain the 

same level of benefits using fewer tax provisions. 

Definition of a qualifying child. Under the proposal, the definition of a qualifying child is

simplified across the family-related tax provisions. While the relationship and residency tests are 

maintained, the support test is eliminated and the age test is simplified. To satisfy the age test, 

the child must meet one of the following requirements: be under age 19, under age 22 and a fulltime student for at least five months of the year, or any age and permanently disabled. The age to 

qualify for a benefit is the same across all components of the proposed family provisions,

providing simplification over current law. Additionally, for the child to be a qualifying child for 

purposes of the work credit, the child must have an SSN. Under current law, children must have 

SSNs to be claimed for the EITC, but SSNs are not required for children to be claimed for the 

CTC or ACTC.

Family credit. The family credit is a non-refundable credit that varies by marital status, number 

of dependents, and type of dependent. For 2017, the baseline family credit amount is equal to 

 

22 This proposal maintains current law education benefits. For a more detailed discussion on education benefits and 

ways to simply these provisions, see Tax Expenditures for Education in this series.
10

$820 for unmarried filers without dependents and $1,640 for married couples filing jointly and 

unmarried filers with at least one dependent. For families with dependents, the family credit 

amount is increased by $1,320 for each child dependent and by $820 for each non-child 

dependent. Thus, a married couple with one dependent child and an unmarried taxpayer with one 

dependent child would receive a family credit of $2,960. In contrast to current law personal 

exemptions which cannot be applied against the Alternative Minimum Tax (AMT) taxable 

income, the family credit would be applied against the AMT. The proposed family credit 

parameters are detailed in Appendix Table A3. 

The family credit per person for individuals and non-child dependents is set at an amount

that is equivalent to the tax value of the personal exemption for a taxpayer with a 20% marginal 

tax rate. For example, under current law, a single taxpayer with no dependents is allowed one 

personal exemption valued at $4,100 in 2017. Since the personal exemption lowers the 

taxpayer’s taxable income by $4,100, the value of excluding this amount from income is $4,100 

times the taxpayer’s marginal tax rate. This product comes to $820 for a taxpayer in the 20% tax 

bracket. The value of the current exemption is lower for taxpayers in a lower bracket, e.g., it is 

$615 in the 15% bracket, and higher for taxpayers in a higher bracket, e.g., $1,025 for taxpayers 

in the 25% bracket.

Replacing the child tax credit and personal and dependent exemptions with the family 

credit will have effects that vary from family to family, depending on family composition and 

income level. For families with child dependents, the family credit per child of $1,320 is set at an 

amount equivalent to the tax value of the personal exemption for a dependent of a taxpayer with 

a 20% marginal tax rate plus half of the maximum amount of the current law child tax credit. At 

these family credit amounts, families in a tax bracket at or below 20% will benefit (or be 

unaffected) by replacing personal exemptions with the family credit, but may be worse off by 

partially replacing the child credit with a non-refundable family credit. In contrast, depending on 

family composition and income, some families in the 25% tax bracket or higher might be worse 

off under the proposal since they would be trading an exemption worth at least $1,025, or 25% of 

$4,100, per person for a credit worth as little as $820 per person.

23 However, those with incomes 

high enough to be in the personal exemption phase-out range may be better off because the 

 

23 For example, a married couple with a marginal tax rate of 25% and one non-child dependent would be trading off 

exemptions worth $3,075 (25% of 3*$4,100) for a family credit of $2,460 ($1,640 plus $820). If instead the 

dependent were a child, their family credit would be worth $2,960 ($1,640 plus $1,320).
11

exemption phases out but the proposed family credit does not.

24 In addition, taxpayers who are 

subject to the AMT will generally see a tax decrease from replacing the exemptions with the 

family credit. Differences in final tax liability (as opposed to the relative effects of the personal 

exemptions and the family credit discussed here) will depend on the effect of all provisions and 

is discussed beginning on page 9. 

Work credit. The work credit is a refundable credit roughly similar in design to the current law 

EITC. Like the EITC, the work credit would phase in based on earnings, phase out with the 

greater of earned income or adjusted gross income, and be subject to an asset income test. But 

there are important differences between the two credits, e.g., in contrast to the EITC, the work 

credit has higher phase-in rates, higher maximum amounts, does not phase out completely for 

taxpayers with qualifying children, and does not vary by marital status. It has four schedules 

based on the number of qualifying children (none through three or more). For childless workers, 

the work credit would phase-in at a rate of 15.3% or double of the phase-in rate under current 

law. In 2017, the maximum childless work credit would be $765 and phase-out to zero between 

$11,500 and $21,500. For families with qualifying children, the phase-in rate is 15 percentage 

points higher than under the current law EITC, in order to replace the refundable portion of the 

current law child tax credit. To further replace a portion of the child tax credit, the work credit 

phases down less severely than does the current EITC, to $500 for families with one child, 

$1,000 for families with two children, and $1,500 with families with three or more children. The 

proposed work credit parameters are detailed in Appendix Table A4. 

Secondary earner credit.

25 This is a refundable credit targeted to dual-earner married couples. 

This credit in motivate in part to replace EITC marriage penalty relief, but also to offer more 

general tax relief for married couples with two earners. While EITC marriage penalty relief 

benefits dual-earner couples with earnings in the extended plateau and phaseout range, it benefits 

single-earner couples in the extended plateau and phaseout range as well. EITC marriage penalty 

 

24 The personal exemption begins to phase out when AGI is above $262,200 in 2017 ($314,650 if married).

25 This proposed secondary earner credit is more generous than that proposed in the Administration’s FY2017 

Budget. The Administration’s Budget proposes a secondary earner credit equal to 5% of the lower earner’s earned 

income up to $10,000 for a maximum credit of $500 and the credit would be phased out at a rate of one-half of a 

percentage point for every $10,000 of AGI over $120,000. Under our simplification proposal, the secondary earner 

credit would not phase out to prevent lower earners from facing high marginal tax rates with the tradeoff being that 

high income couples would still be eligible to receive the credit. 
12

relief does not benefit dual-earner couples who earn less than the end of the plateau for single 

fliers. In contrast, the secondary earner credit would directly target dual-earner couples by 

making the credit a function of the lower earner spouse’s earnings only. In 2017, the secondary 

earner credit phases in at a rate of 7.65% of the second earner’s (i.e., the lower earner’s) earnings 

up a maximum of $8,000 of earnings. The maximum credit would be $612 (7.65% of $8,000). 

Because it would not phase down, dual-earner married couples throughout the income 

distribution receive a tax benefit from the secondary earner credit, in contrast to the EITC 

benefits.

Calculating tax liability. Boxes 1 through 3 show the breakdown of tax liability and credits for a 

variety of family types under current law and under the simplification proposal. These examples 

illustrate how the specific components of current law and the replacement credits differ and 

contribute to a family’s final tax liability. The examples also illustrate the inherent tension 

between simplification efforts and preventing tax increases for some family types.
10

Box 1

Comparison of Tax Liability and Tax Credits under Current Law and

Simplification Proposal for Unmarried Taxpayers without Children

This family consists of an unmarried taxpayer with no children. The breakdown of tax 

liability is shown if she earns $30,000 and if she earns $100,000. In both cases, she

claims a standard deduction under current law. This example illustrates how the family 

credit is less generous for taxpayers with higher incomes. Relative to current law, the 

unmarried taxpayer earning $30,000 would owe $205 less in tax liability under the 

proposal. In contrast, the unmarried taxpayer earning $100,000 would owe $249 more 

in tax liability under the proposal than under current law.

Current Law Proposal Current Law Proposal

Personal Exemptions 4,100 0 4,100 0

Standard Deduction 6,400 6,400 6,400 6,400

Taxable Income 19,500 23,600 89,500 93,600

Tax Before Credits 2,456 3,071 18,101 19,170

Non-Refundable Credits:

Child Credit 0 0 0 0

Family Credit 0 820 0 820

tentative baseline credit 0 820 0 820

tentative dependent credit 0 0 0 0

Total Nonrefundable Credits 0 820 0 820

Tax Before Refundable Credits 2,456 2,251 18,101 18,350

Refundable Credits:

EITC 0 0 0 0

Additional Child Tax Credit 0 0 0 0

Work Credit 0 0 0 0

Total Refundable Credits 0 0 0 0

Final Tax Liability1

2,456 2,251 18,101 18,350

Net Change in Liability from Reform2

-205 249

1

 Negative values indicate the family is receiving a refund.

Earnings $30,000 Earnings $100,000

2

 The net change in liability from reform is calculated as the change in tax liability faced by the family that would 

occur if the proposal were enacted. A negative value indicates that the family's liability (refund) would decrease 

(increase).
11

Box 2

Comparison of Tax Liability and Tax Credits under Current Law and 

Simplification Proposal for Married Taxpayers without Children

This family consists of a married couple with no children. The breakdown of tax 

liability is shown if the couple contains one earner with $30,000 and one earner with 

$100,000. In both cases they claim a standard deduction under current law. This 

example illustrates how the family credit is less generous for taxpayers with higher 

income. Relative to current law, the married couple earning $30,000 would owe $820 

less in tax liability under the proposal. In contrast, the unmarried taxpayer earning 

$100,000 would owe $410 more in tax liability under the proposal than under current 

law.

Current Law Proposal Current Law Proposal

Personal Exemptions 8,200 0 8,200 0

Standard Deduction 12,800 12,800 12,800 12,800

Taxable Income 9,000 17,200 79,000 87,200

Tax Before Credits 900 1,720 11,203 13,253

Non-Refundable Credits:

Child Credit 0 0 0 0

Family Credit 0 1,640 0 1,640

tentative baseline credit 0 1,640 0 1,640

tentative dependent credit 0 0 0 0

Total Nonrefundable Credits 0 1,640 0 1,640

Tax Before Refundable Credits 900 8 0 11,203 11,613

Refundable Credits:

EITC 0 0 0 0

Additional Child Tax Credit 0 0 0 0

Work Credit 0 0 0 0

Total Refundable Credits 0 0 0 0

Final Tax Liability1900 8 0 11,203 11,613

Net Change in Liability from Reform2-820 410

1

 Negative values indicate the family is receiving a refund.

Earnings $30,000 Earnings $100,000

2

 The net change in liability from reform is calculated as the change in tax liability faced by the family that would 

occur if the proposal were enacted. A negative value indicates that the family's liability (refund) would decrease 

(increase).
12

Box 3

Comparison of Tax Liability and Tax Credits under Current Law and 

Simplification Proposal for a Single Parent with Two Children

This family consists of a single parent with two children who are eligible for the EITC 

and the child credit. The breakdown of tax benefits is shown if she earns $20,000 and if 

she earns $30,000. In both cases she claims a standard deduction under current law. 

This example illustrates how difficult it is to retain current benefit levels for the lowest 

earners with a simplified set of credits. Under both current law and the simplification 

proposal, the single parent would not owe any tax. Relative to current law, the parent 

earning $20,000 would receive $693 less in refundable credits under the proposal. In 

contrast, the parent earning $30,000 would receive a refund $769 greater under the 

proposal than under current law.

Current Law Proposal Current Law Proposal

Personal Exemptions 12,300 0 12,300 0

Standard Deduction 9,400 6,400 9,400 6,400

Taxable Income 0 13,600 8,300 23,600

Tax Before Credits 0 1,571 830 3,071

Non-Refundable Credits:

Child Credit 0 0 830 0

Family Credit 0 1,571 0 3,071

tentative baseline credit 0 1,640 0 1,640

tentative dependent credit 0 1,640 0 1,640

Total Nonrefundable Credits 0 1,571 830 3,071

Tax Before Refundable Credits 0 0 0 0

Refundable Credits:

EITC 5,293 0 3,187 0

Additional Child Tax Credit 2,000 0 1,170 0

Work Credit 0 6,600 0 5,126

Total Refundable Credits 7,293 6,600 4,357 5,126

Final Tax Liability1-7,293 -6,600 -4,357 -5,126

Net Change in Liability from Reform2693 -769

1

 Negative values indicate the family is receiving a refund.

2

 The net change in liability from reform is calculated as the change in tax liability faced by the family that would 

occur if the proposal were enacted. A negative value indicates that the family's liability (refund) would decrease 

(increase).

Earnings $20,000 Earnings $30,000
13

Figure 6 presents the marginal and average tax rates faced by joint filers with one dependent 

child, and one earner. This is the same family as in Figure 2.26 In addition to marginal and 

average tax rates, the figure also presents the amount of tax support the family receives as a 

result of the child. The tax support for the child that is due to the worker credit is shown in a 

lighter shade than the portion due to the remaining child-related provisions. Under the 

simplification proposal, marginal rates are often lower than under current law and rarely higher. 

For instance, taxpayers do not face the repeal of the child credit beginning at $110,000 and there 

is a smaller range of moderate-income taxpayers facing marginal rates at or above 25.98%.

27 In 

contrast, marginal rate brackets begin at lower incomes under the proposal than under current 

law due to the loss of the dependent exemption under the simplification proposal.28 The repeal of 

the dependent exemption also smooths the tax support for a child as incomes increase because an 

exemption lowers taxes by the value of the exemption times a filer’s marginal tax rate.

Families with a tax decrease or tax increase. Tables 7-9 show the distribution of families with a 

tax change under the simplification proposal by AGI relative to current law. Table 7 contains all 

taxpayers, Table 8 is restricted to taxpayers without dependents, and Table 9 is restricted to 

taxpayers with dependents.

Table 7 shows that overall, 54.8% of families would experience a tax decrease under this 

simplification plan with an average benefit of $792, and 20.3% of families would experience a 

tax increase with an average loss of $514. The average net tax change is a decrease of $330. 

With the exception of families with AGI below $15,000, a majority of families in each income 

bin would receive a tax cut under the simplification proposal. Most families with AGI between 

$0 and $15,000 would have no tax change.

 

26 The number of earners under current law does not affect tax liability. 

27 Under current law, the phase-out rate for EITC claimants with one child is 15.98%. Most claimants in the phaseout range are in the 10% marginal rate bracket. Under the simplification proposal, claimants in the 10% bracket have 

their taxable income offset by the family credit, and therefore have a marginal rate of zero before considering the 

work credit. 

28 Dependent exemptions decrease taxable income relative to adjusted gross income under current law. Thus, 

removing the dependent exemptions from the calculation of taxable income decreases the adjustable gross income at 

which a taxpayer would enter the next marginal rate bracket.
14

Table 8 shows that among taxpayers without dependents, 48.9% have a tax decrease while 

17.1% have a tax increase. The average tax change among those with a tax decrease is -$434 

while the average tax change among those with a tax increase is $284. Most taxpayers without 

dependents who have AGI between $15,000 and $50,000 would pay lower taxes under the 

simplification proposal. For taxpayers with AGI between $50,000 and $200,000, most 

experience a tax increase. The tax increase in this income range is mainly due to the proposal’s 

family credit being less generous than current law’s personal exemption for persons with 

relatively high marginal tax rates. In particular, the family credit is as generous as the personal 

exemption assuming a 20% tax rate, but many taxpayers’ marginal tax rate is greater than 20%

(See Box 1 and Box 2 for examples). With the exception of taxpayers subject to the AMT, 

taxpayers in the 25% tax bracket or higher with incomes below the personal exemption phase out 

will generally be worse off under the proposal. Taxpayers subject to the AMT would benefit 

from the replacing the personal exemptions with the family credit as discussed above. Taxpayers 

with high enough income to be sufficiently constrained by the current law personal exemption 

phase-out will be better off when exemptions are replaced by the family credit. 

Table 9 shows that among taxpayers with dependents, 68.2% would have a tax decrease while 

27.7% would have a tax increase under the simplification proposal. The average tax change 

among those with a tax decrease is -$1,383 while the average tax change among those with a tax 

increase is $840. There is a large share of low-income families that would experience a tax 

increase. In particular, 34.4% of families with AGI between $0 and $15,000 and 48.8% of 

families with AGI between $15,000 and $30,000 would experience a tax increase. As depicted in 

Figures 1-6, there is a large spike in current law tax benefits around these income levels, which

comes from the combined benefit of the EITC and the ACTC. By consolidating these provisions, 

the proposal is trading off a simpler tax system for a lower level of benefits for this income group

(See Box 3 for an example). To reduce the fraction of families experiencing a tax increase in 

these income ranges using the current structure of the simplification proposal, the refundable 

work credit would have to be significantly expanded. This would result in a disproportionately 

large revenue cost because families at higher income levels, many of whom are already

experiencing a tax decrease, would also receive a larger work credit. For example, if the phase-in 

rates for the work credit with children are increased by 10 percentage points and the start of the 
15

phase-out is shifted out to $28,000 instead of $23,000, then the fraction of families with a tax 

increase reduces from 34.4% to 7.2% for those with AGI between 0 and 15,000, and from 48.8% 

to 11.9% for those with AGI between $15,000 and $30,000. However, expanding the work credit 

in this way adds an additional $361 million dollars (or nearly 50%) to the cost of the 

simplification proposal, bringing the total cost to almost $1.2 billion over the 10 year window.

Between 2017 and 2026, between 50% and 65% of the additional annual cost is a result of 

increasing benefits to families with AGI between $30,000 and $75,000, among which the vast 

majority was already experiencing a tax decrease under the original work credit specification. 

The vast majority of families with dependents and AGI above $30,000 would experience 

a tax decrease from this simplification proposal. The presence of taxpayers with dependents who 

experience a tax increase throughout the income distribution is due in part to the restriction of the 

work credit to families with SSNs and by not allowing a more generous work credit for families 

with three or more children. Using 2013 INSOLE data, the estimated number of families 

claiming the CTC or ACTC with a child who does not have an SSN was 1.5 million. Under 

current law, the child tax credit can be claimed for children without SSNs and each qualifying 

child (no matter how many) gives the taxpayer up to $1,000 in credit; the portion of the work 

credit replacing the current law child credit is lost to these families.

Another aspect of the simplification proposal that creates both families with tax increases 

and tax decreases in any given year is the standardization of the age rules. As a result, a family 

may experience tax decreases in certain years and experience tax increases in other years.

Families whose children have aged out of the current law child credit (older than 16) would still 

receive family and work credits based on those children under the simplification proposal. On 

the other hand, families supporting students age 22 and 23 would lose current law tax benefits. 

Furthermore, families with children would benefit from the proposal over time because the 

benefits are indexed for inflation whereas the current law CDCTC and CTC are not indexed. As 

a result, the fraction of families with children who would experience a tax decrease would be 

higher in later years while the fraction of families who would experience a tax increase would be 

lower.

Figure 7 compares taxes under the simplification proposal and current law for a joint filer with 

one dependent child and income under $60,000. Filers with one and two workers are shown 
16

separately for the simplification proposal. At incomes where tax liability is below the x-axis, the 

family receives a refund. At the point where tax liability crosses the x axis, the couple moves 

from receiving a refund to having positive tax liability. Filers receive refunds at higher incomes 

under the proposal than under current law. This figure shows that at the lowest incomes, one- and 

two-earner married couples are slightly better off under the proposal than under current law. The 

one-earner families are worse off under the proposal than under current law at incomes between 

$8,000 and $32,000. Thereafter one-earner families are generally better off under the proposal 

than under current law. Two earner families have similar tax liability under the proposal and 

current law at incomes between $10,000 and $26,000. Thereafter two-earner families are 

generally better off under the proposal than under current law.29 Although the details would be 

different for single filers or families with a different number of dependents, this comparison 

illustrates the inherent tension between simplification efforts and preventing revenue losses or

tax increases for some categories of taxpayers.

Section 4: Conclusion

This paper has provided a description of the major tax benefits available to families with children 

under current law. As a result of these benefits, families with dependent children pay lower 

federal income taxes than similar families without children. Many families receive substantial 

refunds. In addition to describing the main provisions supporting families with children, and 

describing the distribution of these benefits in a series of tables, this paper presents a series of 

figures to show how these provisions interact to affect the final tax liability of the families 

benefitting from them.

As is illustrated in the figures and tables in Sections 1 and 2, current law tax provisions are 

complicated, marginal tax rates may be high and may vary greatly over small income bands. 

Therefore, the third section presents an alternative set of credits that could replace the main

 

29 One-earner families with incomes in excess of $60,000 and one dependent child are better off under the proposal 

than under current law except at incomes between $100,000 and $123,000. However, the differences in tax liability

between the proposal and current law in this range are small, representing less than one percent of current-law aftertax resources. Two earner families with incomes in excess of $60,000 and one dependent child are better off under 

the proposal than under current law except at incomes between $107,000 and $11,000 where differences are 

negligible (less than $10). Recall that Figure 7, like all of the figures presents results for typical families, subject to 

the simplification assumptions described on page 4. The figures are illustrative and do not account for the specific 

circumstances of any actual family that would affect their tax liability.
17

current law benefits with an aim toward simplifying the tax benefits for families. This exercise 

shows one way that consolidating and simplifying tax benefits could be achieved. However, the 

exercise also demonstrates that simplification is not possible without imposing a tax increase on 

some families or by reducing income tax revenue.
18

Section 5: Works Cited

Holtzblatt, Janet and Janet McCubbin. 2003. “Whose Child is it Anyway? Simplifying the 

Definition of a Child”. National Tax Journal, 56(3), 701-718.

Kearney, Melissa, and Lesley Turner. 2013 Giving Secondary Earners a Tax Break: A Proposal 

to Help Low- and Middle-Income Families. Washington, DC: Brookings Institution, 

Hamilton Project Discussion Series 2013-7.

Maag, Elaine. 2010. “Simplicity: Considerations in Designing a Unified Child Tax Credit”.

National Tax Journal, 63(4, Part 1), 765-780.

Maag, Elaine. 2011. Tax Simplification: Clarifying Work, Child, and Education Incentives.

Washington, DC: Urban-Brookings Tax Policy Center.

Maag, Elaine. 2015. Investing in Work by Reforming the Earned Income Tax Credit.

Washington, DC: Urban-Brookings Tax Policy Center.

The President’s Advisory Panel on Federal Tax Reform, 2005. Simple, Fair, and Pro-Growth: 

Proposals to Fix America’s Tax System. U.S. Government Printing Office, Washington, DC.

The President’s Economic Recovery Advisory Board, 2010. The Report on Tax Reform Options: 

Simplification, Compliance and Corporate Taxation. U.S. Government Printing Office, 

Washington, DC.

U.S. Congress. 2004 Working Families Tax Relief Act of 2004, Public Law 108-311 

<https://www.congress.gov/108/plaws/publ311/PLAW-108publ311.pdf>

U.S. Department of the Treasury, Office of Tax Analysis. The Income Tax Treatment of Married 

Couples. 2016. <https://www.treasury.gov/resource-center/tax-policy/taxanalysis/Documents/Two-Earner-Penalty-and-Marginal-Tax-Rates.pdf>.

U.S. Department of the Treasury, Office of Tax Analysis. Tax Expenditures for Education. 2016.

<https://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/WP-113.pdf>.
19 Families Total Average

Benefiting Benefit Benefit

(Thousands) ($Millions) ($) 0.0 0 0

0 <= 15,000 694 9 8 142

15,000 <= 30,000 7,413 3,784 511

30,000 <= 40,000 4,656 3,934 845

40,000 <= 50,000 3,656 3,622 991

50,000 <= 60,000 3,105 3,333 1,073

60,000 <= 75,000 3,880 4,509 1,162

75,000 <= 100,000 5,262 6,570 1,249

100,000 <= 200,000 8,363 14,717 1,760

200,000 and over 1,515 2,430 1,604

Total1

38,544 42,999 1,116

Office of Tax Analysis June 21, 2016

1

 Families with negative income are excluded from the lowest income class but included in the total line. 

Table 1

Estimated Benefit from

Dependency Exemptions for Children

Tax Year 2017

Adjusted Gross Income

Families Total Average

Benefiting1 Benefit Benefit

(Thousands) ($Millions) ($)

0.0 0 1,996

0 <= 15,000 133 6 3 473

15,000 <= 30,000 4,502 1,300 289

30,000 <= 40,000 2,948 1,572 533

40,000 <= 50,000 2,051 1,077 525

50,000 <= 60,000 1,447 800 553

60,000 <= 75,000 1,317 1,476 1,120

75,000 <= 100,000 1,080 1,727 1,600

100,000 <= 200,000 777 1,324 1,703

200,000 and over 7 3 247 3,356

Total214,329 9,586 669

Office of Tax Analysis June 21, 2016

Adjusted Gross Income

Table 2

Estimated Benefit from

Head of Household Filing Status

(Compared to Single Filing Status)

Tax Year 2017

1 This table includes head of household filers with child and non-child dependents. 

2

 Families with negative income are excluded from the lowest income class but included in the total line. 
20 Families Total Average

Benefiting Benefit Benefit

(Thousands) ($Millions) ($)

0 <= 15,000 5,588 5,458 977

15,000 <= 30,000 8,620 14,071 1,632

30,000 <= 40,000 4,062 7,091 1,746

40,000 <= 50,000 3,072 5,459 1,777

50,000 <= 60,000 2,537 4,390 1,731

60,000 <= 75,000 3,086 5,386 1,745

75,000 <= 100,000 4,055 7,056 1,740

100,000 <= 200,000 3,697 5,186 1,403

200,000 and over 2 1 510

Total134,850 54,305 1,558

Office of Tax Analysis June 21, 2016

Table 3A

Estimated Benefit from

the Child Tax Credit and the Additional Child Tax Credit (ACTC) by Adjusted Gross Income

Tax Year 2017

Adjusted Gross Income

1

 Families with negative income are excluded from the lowest income class but included in the total line. 

Families Total Average

Benefiting Benefit Benefit

(Thousands) ($Millions) ($)

0 <= 15,000 5,586 5,456 977

15,000 <= 30,000 8,308 12,735 1,533

30,000 <= 40,000 2,772 4,358 1,572

40,000 <= 50,000 1,480 2,163 1,461

50,000 <= 60,000 647 935 1,445

60,000 <= 75,000 331 476 1,436

75,000 <= 100,000 128 215 1,684

100,000 <= 200,000 2 4 3 7 1,571

200,000 and over 0 0 491

Total119,406 26,579 1,370

Office of Tax Analysis June 21, 2016

Table 3B

Estimated Benefit from

the Additional Child Tax Credit (ACTC) by Adjusted Gross Income

Tax Year 2017

Adjusted Gross Income

1

 Families with negative income are excluded from the lowest income class but included in the total line. 
21 Families Total Average

Benefiting1 Benefit Benefit

(Thousands) ($Millions) ($)

0 <= 15,000 13,027 23,498 1,804

15,000 <= 30,000 8,399 31,710 3,775

30,000 <= 40,000 3,793 7,158 1,887

40,000 <= 50,000 1,570 1,636 1,042

50,000 <= 60,000 179 6 6 368

60,000 <= 75,000 0 0 0

75,000 <= 100,000 0 0 0

100,000 <= 200,000 0 0 0

200,000 and over 0 0 0

Total127,167 64,315 2,367

Office of Tax Analysis June 21, 2016

Table 4

Estimated Benefit from

the Earned Income Tax Credit (EITC) by Adjusted Gross Income

Tax Year 2017

Adjusted Gross Income

2

 Families with negative income are excluded from the lowest income class but included in the total line. 

1 This table includes 7.3 million EITC claimants who do not have qualifying children. They receive a total 

benefit of $2.2 billion.

Families Total Average

Benefiting1 Benefit Benefit

(Thousands) ($Millions) ($)

0 <= 15,000 4 0 6 1

15,000 <= 30,000 576 251 435

30,000 <= 40,000 677 414 611

40,000 <= 50,000 571 319 558

50,000 <= 60,000 486 253 521

60,000 <= 75,000 606 338 559

75,000 <= 100,000 971 559 575

100,000 <= 200,000 1,734 998 575

200,000 and over 626 340 544

Total26,252 3,472 555

Office of Tax Analysis June 21, 2016

2

 Families with negative income are excluded from the lowest income class but included in the total line. 

Table 5

Estimated Benefit from

Child and Dependent Care Credit (CDCTC)

Tax Year 2017

Adjusted Gross Income

1

 This table includes families with child and non-child dependents with care expenses.
22 Families Total Average

Benefiting1 Benefit Benefit

(Thousands) ($Millions) ($)

0.0 4 5 983

0 <= 15,000 2,278 1,918 842

15,000 <= 30,000 2,782 3,527 1,268

30,000 <= 40,000 1,403 2,138 1,524

40,000 <= 50,000 1,161 1,864 1,607

50,000 <= 60,000 941 1,565 1,663

60,000 <= 75,000 1,143 2,088 1,826

75,000 <= 100,000 1,414 2,676 1,892

100,000 <= 200,000 2,140 4,285 2,002

200,000 and over 0 0 0

Total213,309 20,107 1,511

Office of Tax Analysis June 21, 2016

2

 Families with negative income are excluded from the lowest income class but included in the total line. 

Table 6

Estimated Benefit from

American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC)

Tax Year 2017

Adjusted Gross Income

1

 This table includes families with education expenses for the tax filers or for their dependent children.
23 Families

Number Total Average Number Total Average Number Total Average

Adjusted Gross Income (thousands) % ($millions) ($) (thousands) % (thousands) ($) (thousands) ($millions) ($)

0 <= 15,000 19,188 31.5% -9,384 -489 3,225 5.3% 1,830 568 60,827 -7,554 -124

15,000 <= 30,000 20,741 68.1% -11,290 -544 5,622 18.5% 4,943 879 30,454 -6,348 -208

30,000 <= 40,000 12,417 87.5% -7,612 -613 1,406 9.9% 1,772 1,260 14,192 -5,840 -412

40,000 <= 50,000 9,294 80.7% -5,527 -595 2,017 17.5% 1,032 512 11,521 -4,495 -390

50,000 <= 60,000 4,903 53.2% -4,046 -825 4,211 45.7% 1,329 316 9,211 -2,717 -295

60,000 <= 75,000 5,972 54.7% -5,830 -976 4,850 44.4% 1,924 397 10,912 -3,906 -358

75,000 <= 100,000 8,310 61.9% -8,371 -1,007 5,049 37.6% 1,789 354 13,435 -6,582 -490

100,000 <= 200,000 11,143 56.1% -9,076 -814 8,463 42.6% 3,447 407 19,848 -5,629 -284

200,000 and over 6,403 78.7% -16,905 -2,640 1,698 20.9% 662 390 8,140 -16,243 -1,996

Total198,787 54.8% -78,275 -792 36,633 20.3% 18,820 514 180,334 -59,455 -330

Office of Tax Analysis 

Tax Year 2017

Families with a Tax Decrease/Tax Increase from Simplification Proposal

Table 7

1Families with negative income are excluded from the lowest income class but included in the total line.

Families Tax Decrease Families Tax Increase

Families with a Tax Decrease Families with a Tax Increase

May 10, 2016

Net Tax Change

Total
24 Families

Number Total Average Number Total Average Number Total Average

Adjusted Gross Income (thousands) % ($millions) ($) (thousands) % (thousands) ($) (thousands) ($millions) ($)

0 <= 15,000 14,953 28.6% -6,852 -458 267 0.5% 133 497 8,332 -6,720 -129

15,000 <= 30,000 15,604 79.4% -5,000 -320 351 1.8% 79 224 10,323 -4,921 -250

30,000 <= 40,000 8,607 96.0% -2,748 -319 74 0.8% 31 413 4,932 -2,718 -303

40,000 <= 50,000 6,087 81.2% -1,873 -308 1,243 16.6% 197 158 3,749 -1,676 -223

50,000 <= 60,000 2,365 40.6% -1,234 -522 3,382 58.1% 751 222 3,146 -483 -83

60,000 <= 75,000 2,868 42.4% -1,799 -627 3,834 56.6% 916 239 3,913 -882 -130

75,000 <= 100,000 3,821 48.5% -2,321 -607 3,988 50.6% 951 238 5,310 -1,370 -174

100,000 <= 200,000 4,181 38.0% -1,113 -266 6,734 61.1% 2,457 365 8,559 1,344 122

200,000 and over 2,685 62.1% -3,649 -1,359 1,599 37.0% 580 362 3,743 -3,069 -710

Total161,500 48.9% -26,716 -434 21,480 17.1% 6,093 284 52,260 -20,623 -164

Office of Tax Analysis 

Families Tax Decrease Families Tax Increase

1Families with negative income are excluded from the lowest income class but included in the total line.

May 10, 2016

Net Tax Change

Table 8

Families with a Tax Decrease/Tax Increase from Simplification Proposal, Taxpayers without Dependents

Tax Year 2017

Families with a Tax Decrease Families with a Tax Increase Total
25 Families

Number Total Average Number Total Average Number Total Average

Adjusted Gross Income (thousands) % ($millions) ($) (thousands) % (thousands) ($) (thousands) ($millions) ($)

0 <= 15,000 4,235 49.3% -2,531 -598 2,958 34.4% 1,698 574 52,495 -834 -97

15,000 <= 30,000 5,137 47.5% -6,290 -1,225 5,271 48.8% 4,864 923 20,132 -1,426 -132

30,000 <= 40,000 3,810 72.8% -4,864 -1,277 1,332 25.5% 1,741 1,308 9,260 -3,123 -597

40,000 <= 50,000 3,207 79.8% -3,655 -1,140 774 19.2% 836 1,080 7,772 -2,819 -701

50,000 <= 60,000 2,538 74.9% -2,813 -1,108 828 24.4% 579 699 6,065 -2,234 -659

60,000 <= 75,000 3,104 75.0% -4,031 -1,299 1,016 24.5% 1,007 992 6,999 -3,024 -731

75,000 <= 100,000 4,489 80.8% -6,051 -1,348 1,061 19.1% 838 790 8,125 -5,212 -938

100,000 <= 200,000 6,962 78.8% -7,962 -1,144 1,729 19.6% 990 572 11,289 -6,972 -789

200,000 and over 3,718 97.4% -13,257 -3,565 99 2.6% 83 837 4,396 -13,174 -3,450

Total137,286 68.2% -51,559 -1,383 15,153 27.7% 12,728 840 128,074 -38,832 -711

Office of Tax Analysis 

Families Tax Decrease Families Tax Increase

1Families with negative income are excluded from the lowest income class but included in the total line.

May 10, 2016

Net Tax Change

Table 9

Families with a Tax Decrease/Tax Increase from Simplification Proposal, Taxpayers with Dependents

Tax Year 2017

Families with a Tax Decrease Families with a Tax Increase Total
26

-20%

-10%

0%

10%

20%

30%

0 10 20 30 40 50 60 70 80 90 100 Tax Rate

Adjusted Gross Income (All Income from Wages) ($000)

Figure 1 

Marginal and Average Tax Rates as Family Income Increases

Single Filer No Dependents

Tax Year 2017

Marginal Tax Rate

Average Tax Rate

10% bracket

begins →

← 15% bracket begins ←25% bracket begins

taxpayers begin to 

↓itemize 

EITC phases out

←−−−−→

↖ income tax liability begins

←−−−−→

EITC

phases in

EITC 

plateau

↓
27

0

4,000

8,000

12,000

16,000

20,000

-60%

-40%

-20%

0%

20%

40%

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280

Support for Child ($)

Adjusted Gross Income (All Income from Wages) ($000) Tax Rates

Figure 2

Marginal and Average Tax Rates and and Tax Support for a Child for 

Joint Filer with One Dependent Child

Tax Year 2017

Tax Support for Child (right Axis)

Marginal Tax Rate (left axis)

Average Tax Rate (left axis)

←−−−→

child credit 

phases out 

← 10% bracket begins

←15% bracket begins

← 25% bracket begins 

←−−−→

EITC phases 

out

itemizing 

begins

↓

↖ income tax liability 

begins

28% bracket 

←begins

←−−→EITC and child credit phase in

AMT liability 

begins→ 
28

0

4,000

8,000

12,000

16,000

20,000

-60%

-40%

-20%

0%

20%

40%

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280

Support for Child ($)

Adjusted Gross Income (All Income from Wages) ($000) Tax Rates

Figure 3

Marginal and Average Tax Rates and and Tax Support for a Child for 

Head of Household Filer with One Dependent Child

Tax Year 2017

Tax Support for Child (right axis)

Tax Support from Filing Status Change

Marginal Tax Rate (left axis)

Average Tax Rate (left axis)

←−−→

← 10% bracket begins

←15% bracket begins

← 25% bracket begins 

←−−−→

EITC 

phases out

itemizing 

begins

↓

↖ income tax liability begins

←28% bracket and AMT liability begins

←−−→EITC and child credit phase in

33% bracket 

begins→ 

child credit 

phases out
29

0

4,000

8,000

12,000

16,000

20,000

-60%

-40%

-20%

0%

20%

40%

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280

Support for Student ($)

Adjusted Gross Income (All Income from Wages) ($000) Tax Rates

Figure 4

Marginal and Average Tax Rates and and Tax Support for a Student for 

Joint Filer with One Dependent Student

Tax Year 2017

Tax Support for Student (right axis)

Marginal Tax Rate (left axis)

Average Tax Rate (left axis)

←−−−→

AOTC phases 

out 

← 10% bracket begins

←15% bracket begins

← 25% bracket begins 

←−-−−→

EITC phases 

out

itemizing 

begins

↓

↖ income tax liability 

begins

28% bracket 

←begins

←−−→EITC and child credit phase in

AMT liability 

begins→ 
30

0

4,000

8,000

12,000

16,000

20,000

-60%

-40%

-20%

0%

20%

40%

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280

Support for Child ($)

Adjusted Gross Income (All Income from Wages) ($000) Tax Rates

Figure 5

Marginal and Average Tax Rates and and Tax Support for a Child for 

Head of Household Filer with One Dependent Child in Dependent Care

Tax Year 2017

Tax Support for Child (right axis)

Tax Support from Filing Status Change

Marginal Tax Rate (left axis)

Average Tax Rate (left axis)

←−−→

← 10% bracket begins

←15% bracket begins ← 25% bracket begins 

←−−−→

EITC phases 

out

itemizing 

begins

↓

↖ income tax liability begins

←28% bracket and AMT liability begins

←−−→EITC and child credit phase in

33% bracket 

begins→ 

child credit 

phases out
31
32

6,000

4,000

2,000

0

2,000

4,000

6,000

0 10,000 20,000 30,000 40,000 50,000 60,000

Income Tax Liability, Including Refundable Credits ($000)

Earnings ($000)

Figure 7 

Income Tax Liability for Married Filers with 

One Dependent Child and Two Workers Under 

Current Law and Reform Proposal 

2017

Current Law Proposal 1 worker Proposal 2 workers
33

Appendix

Table A1 Eligibility Rules for Child-Related Income Tax Benefits

Dependent Exemption for 

Dependent Child

Child Tax Credit 

Additional Child Tax Credit

Earned Income Tax Credit Child and Dependent Care Credit Proposal

(§ 151-152) (CTC, ACTC - § 24) (EITC- § 32) (CDCTC - § 21)

Definition of 

Benefit

$4,100 exclusion from income 

for self, spouse, and dependent 

relatives and children.

$1,000 nonrefundable credit per 

child. Refundable to the extent 

that 15% of earnings in excess of 

$3,000 exceeds otherwise 

allowable credit.

Refundable credit of up to 

$6,242 based on earnings 

(phases in), AGI (phases out), 

number of children, and filing 

status.

Partial credit for up to $3,000 of 

expenses for child or dependent care 

($6,000 for two or more children or 

dependents). Credit rate reduces 

with income in excess of $15,000.

Three work and dependent 

related benefits that replace 

many current law benefits.

Income 

Criteria

Phases out sequentially at AGI 

in excess of $262,200 (single 

filers), $288,400 (head of 

household filers), and $314,650 

(joint filers). Personal 

exemptions may not be applied 

against AMT income.

Phase out sequentially with AGI 

in excess of $70,000 ($110,000). 

Taxpayer may not have more 

than $3,450 in unearned 

income. Credit phases out 

completely at $54,075. (See A3 

for complete set of credit 

parameters.)

Credit phases down, but does not 

phase out. Credit match rate reaches 

a minimum at $43,000

Check text. Certain parts 

phase down or out with 

income.

Definition 

Qualifying 

Child 

In general, a qualifying child 

must meet age, residency, 

relationship, and support criteria 

(see following four rows for 

details).

Generally, the same as 

dependent exemption 

(differences below). 

Generally, the same as 

dependent exemption 

(differences below). 

Generally, the same as current law 

for dependent exemption 

(differences below). 

[note: rules for CDCTC establish 

rules for similar benefits through a 

cafeteria plan.]

Generally the child must 

meet age, residency, and 

relationship criteria. 

Age Under 19 or under 24 if full-time 

student or any age if 

permanently and totally 

disabled.

Under 17. Under 19, under 24 if full-time 

student, or any age if 

permanently and totally 

disabled.

Under 13 or any age if permanently 

and totally disabled.

Under 19 or under 22 if fulltime student or any age if 

permanently and totally 

disabled.

Residency Must reside with taxpayer for 

more than half the year.

Must reside with taxpayer for 

more than half the year (noncitizens must reside with 

taxpayer in U.S.)

Same as dependent exemption. Same as dependent exemption. Same as dependent 

exemption.

Relationship Must be the taxpayer’s son or 

daughter, grandchild, sibling, 

niece/nephew, or foster child.

Same as dependent exemption. Same as dependent exemption. Same as dependent exemption. Same as dependent 

exemption.

Support Child cannot be claimed if he or 

she provides over half own 

support.

Same as dependent exemption. No requirement. Same as dependent exemption. No requirement.
34

Table A1 Eligibility Rules for Child-Related Income Tax Benefits, Continued

Dependent Exemption for 

Dependent Child

Child Tax Credit 

Additional Child Tax Credit

Earned Income Tax Credit Child and Dependent Care Credit Proposal

(§ 151-152) (CTC, ACTC - § 24) (EITC- § 32) (CDCTC - § 21)

Child of 

Divorced or 

Separated 

Parents

Custodial parent can waive child 

to noncustodial parent if they 

provides over half of the child's 

support and there is a written 

agreement. 

Same as dependent exemption. Only the parent residing with 

the child can claim qualifying 

child for EITC.

Only the parent residing with the 

child can claim qualifying child for 

CDCTC.

Only the parent residing with 

the child can claim qualifying 

child.

Child: 

Citizenship/ 

Identity 

Documents 

and 

Residency in 

US

U.S. citizen or resident of U.S., 

Canada, or Mexico. 

U.S. citizen or resident of U.S. U.S. citizen or resident of U.S., 

Canada, or Mexico (and must 

reside in the US for over half 

the year). 

Same as dependent exemption Must have SSN generally 

valid for work for work credit 

but ITIN is sufficient for 

family credit.

Must have taxpayer 

identification number (TIN). 

Must have taxpayer 

identification number (TIN). 

Must have SSN generally valid 

for work.

Filer(s): 

Citizenship/ 

Identity 

Documents 

and 

Residency in 

US

No explicit restrictions. Same as dependent exemption. Must have SSN generally valid 

for work.

Same as dependent exemption. Must have SSN for work 

credit and second earner 

credit but ITIN is sufficient 

for family credit.

Notes:

For all purposes in this table, "citizen" also includes US nationals," who are individuals born in American Samoa or the Commonwealth of the Northern Mariana Islands who have made the 

election to be treated as US nationals and not US citizens. Individuals born in Puerto Rico, Guam, and the US Virgin Islands are US Citizens.

Dependent exemptions are also available for qualifying relatives. A qualifying relative can be any age, generally must reside with the taxpayer be related to the taxpayer, be supported by the 

taxpayer (who provides at least half of the relative's support), and have gross earnings less than the value of the dependent exemption. Dependent relatives are defined in § 151-152.

Unmarried taxpayers who maintain a home for a dependent child or relative may be eligible to file as a head of household and benefit from a higher standard deduction and a more generous 

income tax rate schedule than available to single filers. In certain cases, a married taxpayer with children may be considered unmarried for tax purposes. The taxpayer must live apart from his or 

her spouse for the last six months of the year, maintain the household where the children reside for more than half the year and be able to claim the children as dependents as defined in § 151-

152.
35

Table A2

EITC Parameter Chart for 2017

No 

Children One Child Two Children

Three or More 

Children

Phase-in Rate 7.65% 34.00% 40.00% 45.00%

Phase-out Rate 7.65% 15.98% 21.06% 21.06%

Maximum Credit 511 3,410 5,632 6,336 

Phase-in Ends 6,680 10,030 14,080 14,080

Single

Phase-out Begins 8,360 18,390 18,390 18,390

Phase-out Ends 15,040 39,730 45,133 48,475

Joint

Phase-out Begins 13,960 23,990 23,990 23,990 

Phase-out Ends 20,640 45,330 50,733 54,075 

Table A3

Family Credit Parameters 2017

A. Baseline Credit B. Dependent Benefits

Household Dependent Type

Single, Childless 820 Child 1,320

Single w/Dependent 1,640 Non-Child 820

Married 1,640

Dependent Filer 0

Table A4

Work Credit Parameters 2017

No 

Children One Child Two Children

Three or More 

Children

Phase-in Rate 15.30% 49.00% 55.00% 60.00%

Phase-out Rate 7.65% 15.98% 21.06% 21.06%

Maximum Credit 765 3,920 6,600 7,650 

Phase-in Ends 5,000 8,000 12,000 12,750

Single

Phase-out Begins 10,500 23,000 23,000 23,000

Phase-out Ends 20,500 44,402 49,591 52,202

Joint

Phase-out Begins 10,500 23,000 23,000 23,000

Phase-out Ends 20,500 44,402 49,591 52,202

 Phase-out credit 0 500 1000 1500