Reductions in After-Tax Income as a Consequence of Eliminating Certain Tax Expenditures
May 3, 2012
Eliminating or limiting tax expenditures are commonly endorsed tax reform options. However, as with other approaches to raising taxes, the distributional consequences of reducing tax expenditures depend largely on which tax expenditures are eliminated. This chart presents the distributional consequences of eliminating each of the six largest individual tax expenditures. For instance, family-related tax credits like the EITC, CTC, and DCTC are important for promoting the progressivity of the tax schedule because they primarily reduce taxes paid among low-income working families with children. The reduced rates on capital gains and dividends, which are intended to promote saving, primarily benefit taxpayers in the highest income groups.