I think it's correct to say: enacting a child allowance in isolation would have little impact on work incentives.
Income effects are small. No phase-out. That's good.
2/
But that's not the entire proposal.
The allowance is replacing/reforming a number of policies that have both positive and negative incentives on work: CTC, EITC, Head of Household filing status.
3/
The CTC, TANF, etc. have phase-outs which the allowance replaces. That's a positive for incentives.
But the CTC and EITC are being reformed in ways that reduce phase-ins for households with kids. That's a negative.
4/
The net effect on work incentives ~of the entire proposal~ may be closer to 0 than some expect.
5/5
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It would provide $3,000 per child ($4,200 per child under 6), paid out monthly through the Social Security Administration.
Max benefit of $15,000 per year.
It would not be universal: it would phase-out for those with income over $200,000 ($400,000 married filing jointly).
His proposal would be financed (until 2025) by:
-Eliminating the Head of Household filing status
-Removing child benefits from the EITC
-Eliminating the Child and Dependent Care Credit
-Eliminating TANF
-Eliminating the SALT Deduction
-Small reforms to SNAP
When we model, say, Trump's tariffs, we estimate that the level of GDP declines by 0.6%. This means that eventually GDP is going to permanently be 0.6% lower than otherwise. The growth rate, however, doesn't permanently change 2/
These results imply a drop in the growth rate by 0.15 percentage points! That means GDP will be lower than otherwise each year and the output gap will continue to grow as time goes on.
In ten years, GDP will be ~1.5% lower and in twenty, GDP will be 2.9% lower, and so on. 3/