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1 Alan Cole, Changes in Refundable Tax Credits 1 (2014)

handle is hein.taxfoundation/taxfaat0001 and id is 1 raw text is: TA X FOUNDATION Mar. 2014 Changes in Refundable Tax Credits No. 419 Alan Cole Economist Key Findings Refundable tax credits add complexity to the tax code while favoring certain kinds of economic activity over others. For the year 2011, the IRS paid out $99.1 billion in refundable tax credits, down from a peak of over $120 billion in 2009. For comparison, the federal government spends more on refundable tax credits than it spends on the Department of Veterans Affairs ($63.5 billion) or the Department of Education ($71.2 billion). The largest refundable credits currently are the Earned Income Tax Credit, at $65 billion annually, and the Additional Child Tax Credit, at $30 billion annually. In the coming years, the dollar amount of refundable tax credits is projected to double due to the insurance subsidies in the Patient Protection and Affordable Care Act, which both the CBO and the JCT projects to cost about $100 billion annually by 2017. As the ACA subsidies come online, the total expenditures associated with refundable tax credits are projected to surpass $200 billion annually. The phaseout of refundable tax credits as income increases creates high implicit marginal tax rates, and, in some cases, can create infinite marginal tax rates. ........................................................... ...........

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