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

We evaluate the progressivity of the federal Child Care Tax Credit usi ng the Ernst and Young/University of Michigan panel of tax return data . Incidence measures are calculated using both annual and ''time-expos ure'' income to measure ability to pay. Both indicate that the benefit s of the credit are progressively distributed. Replacing annual with t ime-exposure income dramatically increases the proportion of the credi t received by lower-income taxpayers and yields a more even distributi on of benefits across middle- and upper-income taxpayers. Our results suggest that policymakers should use both income measures to evaluate the credit.