Making Work Pay: The Earned Income Tax Credit and Its Impact on America's Families

Making Work Pay: The Earned Income Tax Credit and Its Impact on America's Families

by Bruce D. Meyer
     
 

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

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Overview

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.

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Product Details

ISBN-13:
9780871545992
Publisher:
Russell Sage Foundation
Publication date:
01/28/2002
Pages:
412
Product dimensions:
6.82(w) x 9.50(h) x 1.26(d)

Table of Contents

Contributorsix
Acknowledgmentsxi
Introduction1
Part IThe History of the Earned Income Tax Credit13
Chapter 1The Collision of Tax and Welfare Politics: The Political History of the Earned Income Tax Credit15
Part IIWork and Marriage Incentives67
Chapter 2Making Single Mothers Work: Recent Tax and Welfare Policy and its Effects69
Chapter 3The Impact of the Earned Income Tax Credit and Social Policy Reforms on Work, Marriage, and Living Arrangements116
Chapter 4Measuring the Effect of the Earned Income Tax Credit on Marriage Penalties and Bonuses166
Chapter 5The Optimal Design of the Earned Income Tax Credit196
Part IIICompliance Problems235
Chapter 6Noncompliance with the Earned Income Tax Credit: the Determinants of the Misreporting of Children237
Chapter 7Who Are the Ineligible Earned Income Tax Credit Recipients?274
Part IVHow Recipients Use Their Credit299
Chapter 8The Earned Income Tax Credit: Expectation, Knowledge, Use, and Economic and Social Mobility301
Chapter 9The Effects of the Earned Income Tax Credit on the Seasonality of Household Expenditures329
Chapter 10How Families View and Use the Earned Income Tax Credit: Advance Payment Versus Lump-Sum Delivery366
Index393

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