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A series on tax and transfer policy
2021-2022

Policy Microsimulations




Introduction

This special project consists of timely briefs on live federal policy debates about changes to taxes and transfers.

Microsimulation is a commonly used tool in policy analysis to examine the poverty, distributional, and cost implications of changes to taxes and transfers. It allows us to explore the implications of benefit design (e.g. phase-ins and phase-outs) and financing choices. Although not set up to look at general equilibrium effects like a true macroeconomic model, a microsimulation gives insight into the initial, “gross” impact of a policy change.

Our initial microsimulation work focuses on the Child Tax Credit and variations, with new rounds of policy-relevant analysis to come.


Policy Focus

The Child Tax Credit

September and October 2021. Early analysis of the Biden Administration’s expanded Child Tax Credit (CTC) suggested the policy could be transformational, with the potential to cut child poverty in the United States by 40 percent or more. Our analyses focus on several factors that may influence the policy’s effectiveness. The first brief takes into account a deep implementation challenge, eligible families who do not file taxes; the second brief examines a proposed change to the policy of reducing its refundability. The third brief analyzes a new “compromise” version of the bill as proposed by federal lawmakers.
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