Taxing the Poor: Income Averaging Reconsidered
58 Pages Posted: 14 Jun 2010
Date Written: 2003
This Article presents an original empirical analysis demonstrating that low-income families experience far greater income fluctuations than higher-income families and, as a result, taxation of annual income disproportionately burdens low-income families. The author proposes two simple income averaging devices to redress this effect: averaging the Earned Income Tax Credit over a two-year period and carrying back the standard deduction and personal and dependent exemptions.
Keywords: income volatility, income fluctuations, income averaging, tax policy, income taxation, economic security, Earned Income Tax Credit, standard deduction, personal exemptions
JEL Classification: D10, D30, D31, D63, H22, H24, H30, H31, H53, I32, I38, J18, J20, J31, J38, J63, J65, J68, K34
Suggested Citation: Suggested Citation