Disparities in Knowledge of the EITC

2000

This paper evaluates the effects of the earned income tax credit (EITC) on poor families. Exploiting state-level variation in EITCs, we find that the EITC helps families rise above poverty-level earnings. This occurs by inducing labor market entry in families that initially do not have an adult in the workforce. Evidence based on the federal EITC is less supportive of a positive impact of the EITC on poor families. Finally, our results suggest that for the range of policy changes typical of recent history in the U.S., the EITC is more beneficial for poor families than is the minimum wage.

Economic Quarterly, 2010

he Earned Income Tax Credit (EITC) has become the federal government's largest cash-assistance program for low-income families, making it the centerpiece of anti-poverty programs in the United States. Approximately 15 percent of households nationwide now qualify for the EITC (Hoffman and Seidman 2002). Moreover, unlike other government programs, the EITC is administered through the income tax filing process, which reduces any potential stigma associated with the program, and aids in ensuring high participation rates (Smeeding, Phillips, and O'Connor 2000). According to Eissa and Hoynes (2009), approximately $43 billion was allocated to 22 million families in the United States in 2007 through the federal EITC. This compares to $16.5 billion that was spent on more traditional welfare programs, such as Temporary Assistance for Needy Children (TANF). The EITC is designed to augment income while encouraging work: The tax credit increases with earnings for low levels of household income. The size of the credit is such that, for low-income households that qualify, the EITC is a negative tax on earnings that often constitutes a significant portion of after-tax wage income. The EITC does appear to have been successful in both helping the working poor get out of poverty and encouraging work.

Industrial and Labor Relations Review, 2004

Helping working families : the earned income tax credit / Saul D. Hoffman, Laurence S. Seidman. p. cm. Includes bibliographical references and index.

Journal of Sociology Social Welfare, 2006

Using data from the National Longitudinal Survey of Youth, this study (N = 1,504) showed that about half the EITC eligible tax filers in 2001 did not file EITC tax returns and that differences between EITC tax filers and non-EITC tax filers varied by birth place, Food Stamp program participation, marital status, race, residence, sex, socioeconomic history, and worker classification. Findings suggested that the EITC is well targeted in the sense that economically marginalized groups are likely to participate and that increased outreach efforts are also needed to ensure greater participation among tax filers eligible for the EITC but who are less likely to claim it, especially self-employed persons and those residing in the Northeast.

Northwestern Journal of Law Social Policy, 2009

Families in Society: The Journal of Contemporary Social Services, 2010

This study expands our understanding of participation in the Earned Income Tax Credit (EITC) program among prime working-age individuals from EITC-eligible families between 1999 and 2005. It identifies gaps in program use over time such that outreach efforts might better target low-income working families to increase EITC take-up rates. Relying on National Longitudinal Survey data, findings indicate that more than one third (37.8%) of the population sample was EITC-eligible at least 1 year (3,034 of 8,033 individuals). Less than 20% of EITC-eligible families filed for the credit, and about half of these filed more than 1 year. Robust correlates of EITC use included lower income; larger families; separated, divorced, or widowed persons; and women versus their respective counterparts. Strategies to increase the EITC take-up rates are discussed.

Population Research and Policy Review, 2009

Using survey data from Earned Income Tax Credit (EITC) recipients in Madison County, New York, we evaluate the effectiveness of the EITC in improving the economic well-being of low-income households. In particular, we examine the impact of the EITC across household types. For tax years 2002 through 2004, we find that the EITC is responsible for significantly lowering the poverty rate of EITC recipients, from 57 to 49 percent. In fact, for households below the poverty line, the EITC fills 31 percent of the gap between their adjusted gross income and the poverty line. The EITC has the largest impact on single parent households, lowering their poverty rate by 11.2 percentage points and reducing their poverty gap by almost 35 percent. However, the EITC has negligible effects on the poorest households in the sample-childless singles. A majority (64 percent) of EITC recipients intends to use at least some of the refund on basic needs and almost half plan on using part of their refund for debt repayment. This suggests that the EITC helps the majority of recipients get by but does not increase their economic mobility. Somewhat surprisingly, single parent households in the sample are not that different from married parent households in terms of EITC amounts, poverty rates, use of credit, and participation in government programs, despite earning less.

2015

The Earned Income Tax Credit (EITC) provides substantial assistance to low-income working families with children. The credit encourages work for many, though may reduce work or wages for some. Counted in the poverty measure, the EITC would have been credited with lifting 6.5 million people out of poverty in 2012. The credit fails to provide substantial benefits to workers without children, is complicated, has a high erroneous payment rate, and creates substantial marriage penalties for some low- and moderate-income couples. Extending the credit to workers without children or replacing it with an individual worker credit could solve some or all of these criticisms.