Final answer:
The impact of deductions and tax credits varies as some, like the Earned Income Tax Credit (EITC), are designed to support low- to moderate-income earners, while others may benefit high-income individuals more. The EITC encourages work among these earners, while TANF requires work or education. Both cost the government but aim to reduce poverty.
Step-by-step explanation:
The statement that deductions and tax credits benefit high-income individuals more than moderate earners is not entirely true or false, as the impact depends on the specific type of deduction or credit. For example, the Earned Income Tax Credit (EITC) is designed to benefit low- to moderate-income earners by providing a tax break that increases according to how much they work, thus encouraging work and helping to loosen the poverty trap. Families that work more get more of this credit, but as they earn above the poverty level, the earned income tax credit is gradually reduced, which can be a partial disincentive to work for near-poor families. However, some deductions and credits may indeed be more beneficial to high earners, as they have more income against which to apply the deductions.
Programs like the Child Tax Credit (CTC) and the Temporary Assistance for Needy Families (TANF) program cost the federal government money, either in direct outlays or in loss of tax revenues. The TANF program also attempts to loosen the poverty trap by requiring recipients to work or complete their education as a condition of receiving benefits, and it limits the time one can receive these benefits.