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Book Labor Supply Response to the Earned Income Tax Credit

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.

Book Behavioral Responses to Taxes

Download or read book Behavioral Responses to Taxes written by Nada Eissa and published by . This book was released on 2005 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Twenty-two million families currently receive a total of $34 billion dollars in benefits from the Earned Income Tax Credit (EITC). In fact, the EITC is the largest cash transfer program for lower-income families at the federal level. An unusual feature of the credit is its explicit goal to use the tax system to encourage and support those who choose to work. A large body of work has evaluated the labor supply effects the EITC and has generated several important findings regarding the behavioral response to taxes. Perhaps the main lesson learned from the evidence is the confirmation that real responses to taxes are important; labor supply does respond to the EITC. The second major lesson is related to the nature of the labor supply response. A consistent finding is that labor supply responses are concentrated along the extensive (entry) margin, rather than the intensive (hours worked) margin. This distinction has important implications for the design of tax-transfer programs and for the welfare evaluation of tax reforms.

Book The Earned Income Tax Credit and the Labor Supply of Married Couples

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.

Book Labor Supply and Taxation

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.

Book Labor Supply Effects of the Earned Income Tax Credit

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.

Book Labor Supply Response to the Elimination of the EITC for Undocumented Immigrants

Download or read book Labor Supply Response to the Elimination of the EITC for Undocumented Immigrants written by Sakshi Bhardwaj and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper examines the labor market effects of ending the Earned Income Tax Credit (EITC) for undocumented immigrants by requiring a Social Security number to claim the EITC. Exploiting variation across the number of children of undocumented single women, the timing of the policy, and a placebo group of undocumented married men shows that ending the EITC reduced the labor force participation of undocumented single mothers by 7 percentage points. The results suggest that ending the EITC for undocumented immigrants makes the American children of single-mother undocumented immigrants doubly disadvantaged because they not only lack a tax credit but their mothers' labor supply is also reduced as a result.

Book Advance Earned Income Tax Credit

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:

Book Making Work Pay

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.

Book The Earned Income Tax Credit Expenditures and Labor Supply

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.

Book The Short Term Labor Supply Response to the Expanded Child Tax Credit

Download or read book The Short Term Labor Supply Response to the Expanded Child Tax Credit written by Brandon Enriquez and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate the extensive and intensive margin labor supply response to the monthly Child Tax Credit disbursed in 2021 as a part of the American Rescue Plan Act. Using Current Population Survey microdata, we compare labor supply outcomes among households who qualify for varying relative increases in household income, as a result of their income level and household size. We do not find strong evidence of a change in labor supply for families receiving the credit. The results are robust to alternative labor supply models, where households respond mainly to cash on hand or changes in the annual budget set.

Book Work Opportunity and Welfare to work Tax Credits

Download or read book Work Opportunity and Welfare to work Tax Credits written by United States Employment Service and published by . This book was released on 1998 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Means Tested Transfer Programs in the United States

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.

Book A Roadmap to Reducing Child Poverty

Download or read book A Roadmap to Reducing Child Poverty written by National Academies of Sciences, Engineering, and Medicine and published by National Academies Press. This book was released on 2019-09-16 with total page 619 pages. Available in PDF, EPUB and Kindle. Book excerpt: The strengths and abilities children develop from infancy through adolescence are crucial for their physical, emotional, and cognitive growth, which in turn help them to achieve success in school and to become responsible, economically self-sufficient, and healthy adults. Capable, responsible, and healthy adults are clearly the foundation of a well-functioning and prosperous society, yet America's future is not as secure as it could be because millions of American children live in families with incomes below the poverty line. A wealth of evidence suggests that a lack of adequate economic resources for families with children compromises these children's ability to grow and achieve adult success, hurting them and the broader society. A Roadmap to Reducing Child Poverty reviews the research on linkages between child poverty and child well-being, and analyzes the poverty-reducing effects of major assistance programs directed at children and families. This report also provides policy and program recommendations for reducing the number of children living in poverty in the United States by half within 10 years.

Book Teaching the Tax Code

Download or read book Teaching the Tax Code written by Raj Chetty and published by . This book was released on 2009 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests whether providing information about the Earned Income Tax Credit (EITC) affects EITC recipients' labor supply and earnings decisions. We conducted a randomized experiment with 43,000 EITC recipients at H&R Block in which tax preparers gave simple, personalized information about the EITC schedule to half of their clients. Tracking subsequent earnings, we find substantial heterogeneity in treatment effects across the 1,461 tax professionals who assisted the clients involved in the experiment. Half of the tax professionals, whom we term "compliers", induce treated clients to increase their EITC refunds by choosing an earnings level closer to the peak of the EITC schedule. Clients treated by complying tax professionals are 10% less likely to have very low incomes than control group clients. The remaining tax preparers generate insignificant changes in EITC amounts but increase the probability that their clients have incomes high enough to reach the phase-out region. Treatment effects are larger for the self-employed, but are also substantial among wage earners, suggesting that information provision induced real labor supply responses. When compared with other policy instruments, information has large effects: complying tax preparers generate the same labor supply response along the intensive margin as a 33% expansion of the EITC program, while non-complying tax preparers induce the same response as a 5% tax rate cut.