ON THE PROGRESSIVITY OF THE CHILD CARE TAX CREDIT: SNAPSHOT VERSUS TIME-EXPOSURE INCIDENCE

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Abstract
We evaluate the progressivity of the federal Child Care Tax Credit using the Ernst and Young/University of Michigan panel of tax return data. Incidence measures are calculated using both annual and "timeexposure" income to measure ability to pay. Both indicate that the benefits of the credit are progressively distributed. Replacing annual with time-exposure income dramatically increases the proportion of the credit received by lower-income taxpayers and yields a more even distribution of benefits across middle-and upper-income taxpayers. Our results suggest that policymakers should use both income measures to evaluate the credit.

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