Examining the reach and impact of refundable tax credits for low-income households and behavioral responses to tax rate increases (such as “millionaire migration”)

Tax policy is an increasingly important tool for taking on poverty and inequality, particularly through federal and state refundable tax credits that deliver resources to families and individuals with low incomes. CPI is studying the reach and impact of existing and proposed tax credits targeted to low-income tax filers, such as EITCs, child tax credits, and renter’s tax credits. This research builds on CPI’s work on the California Poverty Measure.

Tax policy also determines how much revenue will be available to support public spending priorities, such as poverty- and inequality-reducing initiatives. Understanding behavioral responses to these tax policies is important for effective policy design. For example, if increased taxes cause many individuals to move away from higher-tax areas, these policies will be less effective in raising revenues. CPI’s influential research on “millionaire migration,” based on analysis of administrative tax return data, has helped inform this policy debate.