The interaction of tax and transfer systems and the effective marginal tax rates they
produce for families have wide-ranging implications — for the material well-being of
low- and moderate-income families, for the incentives those families face with respect
to marriage and upward mobility, and for the overall fairness of the nation’s safety net
and real tax system. Reform-minded policymakers at both the federal and state levels
would do well to consider the interactions between these systems when exploring
options for reform. While reform of the welfare and tax systems is so often debated
in a piecemeal fashion that focuses on only one credit or program, our findings and
the findings of others demonstrate that a more comprehensive approach is crucial to
success in designing policy that provides basic adequacy to households in need, treats
households in equal circumstances equally, and promotes upward mobility by rewarding
work effort.