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Earned income tax credit recipients: income, marginal tax rates, wealth, and credit constraints

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  • Kartik Athreya
  • Devin Reilly
  • Nicole B. Simpson

Abstract

The Earned Income Tax Credit (EITC) has evolved into the largest anti-poverty program in the United States by providing tax credits for low and moderate income working families. In this paper, we describe the characteristics of EITC recipients at various ages using Current Population Survey data. In addition, we discuss the relevance of the EITC in affecting marginal income tax rates in the United States and discuss the effects of the EITC on household labor supply decisions. Lastly, using data from the Survey of Consumer Finances, we estimate wealth distributions for EITC recipients and analyze the extent to which EITC recipients are credit constrained.

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Bibliographic Info

Article provided by Federal Reserve Bank of Richmond in its journal Economic Quarterly.

Volume (Year): (2010)
Issue (Month): 3Q ()
Pages: 229-258

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Handle: RePEc:fip:fedreq:y:2010:i:3q:p:229-258:n:v.96no.3

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Keywords: Credit ; Taxation;

References

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  1. Pijoan-Mas, Josep, 2005. "Precautionary Savings or Working Longer Hours?," CEPR Discussion Papers 5322, C.E.P.R. Discussion Papers.
  2. Maria Cancian & Arik Levinson, 2005. "Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin Supplemental Benefit for Families with Three Children," NBER Working Papers 11454, National Bureau of Economic Research, Inc.
  3. Gruber, Jon & Saez, Emmanuel, 2002. "The elasticity of taxable income: evidence and implications," Journal of Public Economics, Elsevier, vol. 84(1), pages 1-32, April.
  4. Jappelli, Tullio, 1990. "Who Is Credit Constrained in the U.S. Economy?," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 219-34, February.
  5. Tiefenthaler, Jill & Simpson, Nicole & Hyde, Jameson, 2008. "The Impact of the Earned Income Tax Credit on Economic Well-being: A Comparison across Household Types," Working Papers 2008-02, Department of Economics, Colgate University.
  6. M. Keane & R. Moffitt, . "A structural model of multiple welfare program participation and labor supply," Institute for Research on Poverty Discussion Papers 1080-96, University of Wisconsin Institute for Research on Poverty.
  7. David Neumark & William Wascher, 2000. "Using the EITC to Help Poor Families: New Evidence and a Comparision with the Minimum Wage," NBER Working Papers 7599, National Bureau of Economic Research, Inc.
  8. Romich, Jennifer L. & Weisner, Thomas, 2000. "How Families View and Use the EITC: Advance Payment versus Lump Sum Delivery," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 1245-66, December.
  9. Eissa, Nada & Hoynes, Hilary Williamson, 2004. "Taxes and the labor market participation of married couples: the earned income tax credit," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1931-1958, August.
  10. Dennis J. Ventry, 2000. "The Collision of Tax and Welfare Politics: The Political History of the Earned Income Tax Credit, 1969 - 1999," JCPR Working Papers 149, Northwestern University/University of Chicago Joint Center for Poverty Research.
  11. Jennifer L. Romich & Thomas Weisner, 2000. "How Families View and Use the EITC: Advanced Payment versus Lump-sum Delivery," JCPR Working Papers 138, Northwestern University/University of Chicago Joint Center for Poverty Research.
  12. Nicole Simpson & Devin Reilly & Kartik Athreya, 2010. "The Earned Income Tax Credit: Insurance Without Disincentives?," 2010 Meeting Papers 1103, Society for Economic Dynamics.
  13. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, October.
  14. Saul D. Hoffman & Laurence S. Seidman, 1990. "The Earned Income Tax Credit," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number eitc, December.
  15. Jeffrey Grogger, 2004. "Welfare transitions in the 1990s: The economy, welfare policy, and the EITC," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(4), pages 671-695.
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Cited by:
  1. John Schmitt, 2012. "Low-wage Lessons," CEPR Reports and Issue Briefs 2012-03, Center for Economic and Policy Research (CEPR).
  2. Simpson, Nicole B., 2013. "Families, Taxes and the Welfare System," IZA Discussion Papers 7369, Institute for the Study of Labor (IZA).
  3. Carol Osler & Tanseli Savaser & Thang Tan Nguyen, 2012. "Asymetric Information and the Foreign-Exchange Trades of Global Custody Banks," Working Papers 55, Brandeis University, Department of Economics and International Businesss School.

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