Download or read book The Earned Income Tax Credit Expenditures and Labor Supply written by Ankur Jagdish Patel and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The Earned Income Tax Credit (EITC) is a refundable tax credit targeted toward the working poor. In the wake of welfare reform, the EITC program expanded dramatically to become the largest federal cash transfer to low-income families in the United States. Unlike traditional welfare, the EITC requires labor force participation. In this dissertation, I explore the impact of the EITC on expenditures and labor supply. The goal is to provide a more complete picture of how this requirement impacts eligible families. In the first chapter, I use variation in the EITC schedule generated by federal legislative expansions between 1984 and 1998 to identify the causal impact of the EITC on expenditures. I estimate the expenditure response using a sample of women with and without children who have not attended post-secondary school within the Consumer Expenditure Survey (CE). I summarize multiple expansions of the EITC schedule across time and family structure using a "simulated" credit that captures the complexity of the EITC schedule without depending on endogenous changes in other outcomes (such as earnings or income). The CE allows for the estimation of a differential response to the EITC within the calendar year because it is administered at the quarterly level. Finally, I use the Current Population Survey (CPS) to estimate the impact of the EITC on after tax and transfer income and its components. These estimates inform the mechanism behind expenditure responses and can be used to rescale the expenditure estimates in a two-sample two-stage least squares framework, so that they are more easily interpretable by policy makers. Assuming the expenditure response to the EITC works entirely through after tax and transfer income, this final estimate may be interpreted as the expenditure response due to a one dollar change in income. I find that total expenditures increase with the EITC. The impact on non-durable expenditures is particularly strong. This result is not consistent with the previous literature exploring the relationship between the EITC and expenditures. Work related expenditures represent one-third of the expenditure response, while housing and "investments" make up another fifty percent. The EITC did not increase child related or recreational expenditures. Within calendar year, the expenditure response is largest in the first quarter relative to subsequent quarters, consistent with the timing of EITC refund receipt. The differential response is driven by expenditures on durable goods. On the other hand, the expenditure response for non-durable goods, work related expenditures and housing expenditures are spread evenly across calendar quarters. Families with young children display relatively large responses to the EITC. In addition to housing and investment, their expenditure response is also driven by food expenditures. Next, I find that after tax and transfer income increases with the EITC in a way suggested by the labor supply literature. The credit's impact on after tax and transfer income is dominated by an increase in earnings, while the decrease in welfare income is balanced by the decrease in tax liability (increase in EITC). Finally, assuming the EITC only affects expenditures through after tax and transfer income, I estimate that a one dollar increase in income increases expenditures by 94 cents. In the second chapter, written with Hilary Hoynes, we use variation in the credit induced by legislative changes across tax year, family size and state of residence. We construct a "simulated" version of the EITC at the federal and state level to summarize these changes. This measure captures changes in the EITC across many parameters, allowing us to fully exploit variation caused by legislative changes in policy. The estimation is divided into two major parts. First, we estimate the impact of the federal credit on labor force participation. We narrow the identifying variation in ways that are relevant to policy and the literature. We use non-parametric differences-in-differences to visually assess the impact of policy changes on labor force participation while checking for pre-existing trends. Second, we estimate the impact of state-level credits on labor force participation. State variation in EITC generosity allows for number of children by year fixed effects, powerful controls which cannot be used in federal EITC policy estimations. State-level EITCs are smaller than the federal EITC, however, making precise estimation more challenging. Finally, we rescale estimates so that they can be easily compared across specifications and used to draw lessons for policy. We find that the federal EITC has increased the labor force participation of single women with children, even when we include detailed controls for other tax and transfer programs. Using an entirely different source of identifying variation, we find that state EITCs increase the labor force participation of single women with children. Although the estimates at the state level are noisy, after we rescale the point estimates in terms of eligible benefits, the impact from the federal EITC is roughly comparable to the impact at the state level. These results are consistent across econometric strategies. In the final chapter, I extend the analysis of the EITC's relationship with family expenditures by contrasting the results from Patel (2012a) with estimates identified using variation in after tax income caused by the Economic Stimulus Payments of 2008 (ESP). The advantage of using this payment is that the timing of disbursement has been randomized. By comparing expenditures of households that have received an ESP in a given period to those who receive an ESP in another period, I estimate a causal impact of a change in after tax and transfer income without using variation correlated with changes in labor supply, earnings or income. The results are imprecise. However, point estimates suggest that total family expenditures increase upon ESP receipt by a magnitude that is similar to the EITC expenditure response found in Patel (2012a). The expenditure response is evenly split between durables and non-durables, with non-durable expenditures concentrated in food and recreational expenditures. Unlike the EITC driven response, work-related expenditures do not change with the ESP. These results suggest that there may be differences in spending patterns depending on the incentives attached to tax and transfer programs.

Download or read book Labor Supply and Taxation written by Richard Blundell and published by Oxford University Press. This book was released on 2016 with total page 485 pages. Available in PDF, EPUB and Kindle. Book excerpt: Presents Richard Blundell's outstanding research on the modern economic analysis of labour markets and public policy reforms and brings together, in revised and integrated form, a number of the author's key papers.

Download or read book The Earned Income Tax Credit and the Labor Supply of Married Couples written by Nada Eissa and published by . This book was released on 1998 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over 18 million taxpayers are projected to receive the Earned Income Tax Credit (EITC) in tax year 1997, at a total cost to the federal government of about 25 billion dollars. The EITC is refundable, so that any amount of the credit exceeding the family's tax liability is returned in the form of a cash refund. Advocates of the credit argue that this redistribution occurs with much less distortion to labor supply than that caused by other elements of the welfare system. This popular view that the credit is unlikely to hold among married couples. Theory suggests that primary earners (typically men) would increase labor force participation, but secondary earners would reduce their labor supply in response to an EITC. We study the labor supply response of married couples to several EITC expansions between 1984 and 1996. While our primary interest is the response to changes in the budget set induced by the EITC, our estimation strategy takes account of budget set changes caused by federal tax policy, and by cross-sectional variation in wages, income, and family size. We use both quasi-experimental and reduced form labor supply models to estimate the impact of EITC induced tax changes. The results suggest that EITC expansions between 1984 and 1996 increased married men's labor force participation only slightly but reduced married women's labor force participation by over a full percentage point. Overall, the evidence suggests that family labor supply and pre-tax family earnings fell among married couples. Our results imply that the EITC is effectively subsidizing married mothers to stay at home, and therefore have implications for the design of the program.

Download or read book Making Work Pay written by Bruce D. Meyer and published by Russell Sage Foundation. This book was released on 2002-01-10 with total page 413 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since its inception under President Ford in 1975, the Earned Income Tax Credit (EITC) has become the largest antipoverty program for the non-elderly in the United States. In 1998, more than nineteen million families received EITC payments, and the program lifted over four million Americans above the poverty line. Despite the rapid growth of the EITC throughout the 1990s, little has been written about how the program works or how it affects low-income families. Making Work Pay provides the first full-scale examination of the EITC, exploring its effects on income distribution, poverty, work, and marriage. Making Work Pay opens with a history of the EITC—its emergence in the 1970s as a pro-work, low-cost antipoverty program and its expansion through the 1980s and 1990s. The central chapters in the volume look at the substantial impact of the EITC on work incentives in recent years and show that the program, in combination with welfare reform and a strong economy, has led to an unprecedented increase in the employment of single mothers. In one study, researchers conclude that the EITC—with its stipulation that one family member be a wage earner—was the most important change in work incentives for single mothers between 1984 and 1996, a period when the employment rate of single mothers rose sharply. Several chapters outline proposals for reforming the program, addressing the concerns by policymakers about the work disincentives that rise as benefits fall with increasing income. Finally, Making Work Pay examines how EITC recipients view the credit and what they do with it once they get it. The contributors find that not only does EITC's lump-sum payment increase consumption but it also allows recipients to make changes in economic status. Many families use the end-of-the-year payment as a form of forced savings, enabling them to save for home improvement, a new car, or other purchases to improve their lives, and providing the extra economic cushion needed to move beyond mere day-to-day survival. Comprehensive in scope, Making Work Pay is an indispensable resource for policymakers, administrators, and researchers seeking to understand the ramifications of the country's largest programs for aiding the working poor.

Download or read book Advance Earned Income Tax Credit written by United States. Internal Revenue Service and published by . This book was released on 1994 with total page 2 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Helping Working Families written by Saul D. Hoffman and published by W.E. Upjohn Institute. This book was released on 2003 with total page 247 pages. Available in PDF, EPUB and Kindle. Book excerpt: Gives an overview of the EITC and makes recommendations for changes.

Download or read book Labor Supply Response to the Earned Income Tax Credit written by Nada Eissa and published by . This book was released on 1995 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a series of major expansions starting in 1987, the earned income tax credit (EITC) has become a central part of the federal government's anti-poverty strategy. In this paper, we examine the impact of the Tax Reform Act of 1986 (TRA86), which included an expansion of the EITC, on labor force participation and hours of work. The expansion of the credit affected an easily identifiable group, single women with children, but is predicted to have had no effect on another group, single women without children. Other features of TRA86, such as the increase in the value of dependent exemptions and the large increase in the standard deduction for head of household filers, are predicted by economic theory to have reinforced the impact of the EITC on the relative labor supply outcomes of single women with and without children. We therefore compare the change in labor supply of single women with children to the change in labor supply of single women without children. We find that between 1984-1986 and 1988-1989 single women with children increased their labor force participation by 1.4 percentage points (from a base of 73.1 percent) relative to single women without children. We explore a number of possible explanations for this finding and conclude that the 1987 expansion of the EITC and the other provisions of TRA86 are the most likely explanations. We find no effect of the EITC expansion on the hours of work of single women with children who were already in the labor force. Compared to other elements of the welfare system, the EITC appears to produce little distortion of work incentives.

Download or read book Labor Supply Effects of the Earned Income Tax Credit written by Maria Cancian and published by . This book was released on 2005 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the labor market consequences of the Earned Income Tax Credit (EITC), comparing labor market behavior of eligible parents in Wisconsin, which supplements the federal EITC for families with three children, to that of similar parents in states that do not supplement the federal EITC. Data come from the 2000 Census of Population. Most previous studies have relied on changes in the EITC over time, or EITC eligibility differences for families with and without children, or have extrapolated from measured labor supply responses to other tax and benefit programs, and find significant effects of the EITC on employment. In contrast, our cross-state comparison examines a larger difference in EITC subsidy rates, uses more similar treatment and control groups, relies on a policy that has been in place for 5 years, and finds no effect of the EITC on employment or hours worked.

Download or read book Employment tax credits as a fiscal policy tool written by Gary C. Fethke and published by . This book was released on 1976 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Redistribution and Tax Expenditures written by Nada Eissa and published by . This book was released on 2008 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the distributional and behavioral effects of the Earned Income Tax Credit (EITC). We chart the growth of the program over time, and argue several expansions show that real responses to taxes are important. We use tax data to show the distribution of benefits by income and family size, and examine the impacts of hypothetical reforms (expansions and contractions) to the credit. Finally, we calculate the efficiency effects of marginal changes to EITC parameters. Targeting the EITC to lower-income families by raising the phase-out rate generates a welfare loss for single mothers, primarily because of the disincentive to enter the labor market and not the traditional hours-of-work distortion.

Download or read book The Impact of the Earned Income Tax Credit on Poverty Labor Supply and Human capital Accumulation written by Scott B. Darragh and published by . This book was released on 2002 with total page 444 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Household expenditure and Labor supply Effects of the Child care Tax Credit written by Theo Edwin Maloy and published by . This book was released on 1992 with total page 504 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Means Tested Transfer Programs in the United States written by National Bureau of Economic Research and published by University of Chicago Press. This book was released on 2003-10-15 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: Few United States government programs are as controversial as those designed to aid the poor. From tax credits to medical assistance, aid to needy families is surrounded by debate—on what benefits should be offered, what forms they should take, and how they should be administered. The past few decades, in fact, have seen this debate lead to broad transformations of aid programs themselves, with Aid to Families with Dependent Children replaced by Temporary Assistance to Needy Families, the Earned Income Tax Credit growing from a minor program to one of the most important for low-income families, and Medicaid greatly expanding its eligibility. This volume provides a remarkable overview of how such programs actually work, offering an impressive wealth of information on the nation's nine largest "means-tested" programs—that is, those in which some test of income forms the basis for participation. For each program, contributors describe origins and goals, summarize policy histories and current rules, and discuss the recipient's characteristics as well as the different types of benefits they receive. Each chapter then provides an overview of scholarly research on each program, bringing together the results of the field's most rigorous statistical examinations. The result is a fascinating portrayal of the evolution and current state of means-tested programs, one that charts a number of shifts in emphasis—the decline of cash assistance, for instance, and the increasing emphasis on work. This exemplary portrait of the nation's safety net will be an invaluable reference for anyone interested in American social policy.

Download or read book Nonparametric Estimation of Labor Supply Under the Earned Income Tax Credit and Welfare Programs written by Ximing Wu and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the effect of the Earned Income Tax Credit (EITC) and welfare programs on the labor supply of single mothers. The EITC consists of an earning subsidy program in the form of marginal tax credits to the working poor. The presence of different marginal tax rates at the various earning levels makes the recipients' budget constraint a non-linear function of hours worked. Correspondingly, I estimate a flexible nonparametric labor supply function, taking full account of the nonlinear budget constraint. I then simulate the impact of each program component and their combined impact on hours. Contrary to the standard assumption of constant policy effect, I show that the EITC effect is heterogenous. An expansion of the EITC increases the hours of poor single mothers whose tax credits increase with earnings, while it decreases the hours of those not so poor whose tax credits decrease with earnings. These two effects cancel out, which explains why previous studies, focusing on the average treatment effect, found that the EITC substantially increased the participation, but had little net effects on the average hours worked. I also find that the recent EITC expansion and welfare reform worked together to significantly increase the hours worked by single mothers. Moreover, despite its disincentive effect on part of the population, the EITC improved the family income for all affected groups.

Download or read book Tax Policy written by United States. General Accounting Office and published by . This book was released on 1993 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Earned Income Tax Credit Project written by Timur V. Kramin and published by . This book was released on 1999 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Earned Income Tax Credit written by Michael Kilpper and published by diplom.de. This book was released on 2002-06-06 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inhaltsangabe:Einleitung: Die aktuelle Debatte um das Mainzer Kombilohnmodell und der Wahlkampf in 2002 haben die Diskussion um die Arbeitsmarktpolitik an der Schnittstelle zur Sozialpolitik wiederbelebt. Wie schon seit langem kommt in dieser Diskussion auch das Bedürfnis nach Vergleichen mit anderen Ländern auf. Und in der Tat ist es sinnvoll, bestimmte Programme des Auslandes auf die Übertragbarkeit in Deutschland zu überprüfen. Die vorliegende Arbeit befasst sich mit dem Earned Income Tax Credit (EITC) in den USA, und versucht diese kleine negative Einkommensteuer als Modell auf Deutschland zu übertragen. Dieses Programm ist von Forschern und politischen Parteien (siehe SPD, CDU, FDP) in verschiedenen offiziellen und inoffiziellen Thesenpapieren oft als mögliches Vorbild thematisiert worden. In der Arbeit werden deshalb folgende Fragen diskutiert: Welche institutionellen Unterschiede gibt es zwischen den USA und Deutschland? Wie funktioniert der Earned Income Tax Credit in den USA? Ist der EITC auf Deutschland übertragbar? Welche ökonomischen Effekte lassen sich theoretisch für die Arbeitsnachfrage und für das Arbeitsangebot identifizieren? Was bedeuten die verschiedenen Varianten wie Bürgergeld, Kombilohn und EITC für den betroffenen Arbeitslosen im Hinblick auf sein Einkommen? Wieviel würde die Einführung eines EITC in Deutschland kosten? Welche polit-ökonomischen Restriktionen bzw. Konsequenzen sind zu erwarten? Die Arbeit geht über die tagespolitische Diskussion hinaus und versucht in den angesprochenen Problemfeldern allgemeine Aspekte ökonomisch zu diskutieren. Die Arbeit ist in Englisch verfasst. Inhaltsverzeichnis:Table of Contents: LIST OF FIGURES4 LIST OF TABLES5 ABBREVIATIONS6 1.Introduction7 2.Economic performance, labor market institutions and reform proposals for Germany9 2.1Economic performance and labor market outcomes in Germany and the USA9 2.2Institutional arrangements in Germany and the United States11 2.2.1Labor market regulation12 2.2.2Welfare policies13 2.2.3The wage structure14 2.3Reform proposals for the low-wage sector in Germany16 3.The Earned Income Tax Credit18 3.1History and political context18 3.2The design of the Earned Income Tax Credit19 3.3Economic analysis of the EITC22 3.3.1General remarks22 3.3.2Labor supply effects22 3.3.3The advanced payment option and labor supply effects25 3.3.4Interactions with other transfer programs26 3.3.5Administrative [...]