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Changes in AFDC Tax Rates, 1967-1971

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  • Robert M. Hutchens

Abstract

This paper presents new measures of the implicit marginal tax rate on earnings in the Aid to Families with Dependent Children (AFDC) program. Previous measures suffer from two types of bias. First, they do not adequately control for nonlinear relationships between AFDC payments and earnings. Second, they are estimated in truncated samples. Through explicit consideration of the AFDC payment formula, methods are devised for eliminating both biases. Using these methods, new estimates of AFDC tax rates are obtained for 1967 and 1971. The data reveal that while federal policy caused tax rates to decline in most states, some states counteracted the federal initiative by altering AFDC program parameters.

Suggested Citation

  • Robert M. Hutchens, 1978. "Changes in AFDC Tax Rates, 1967-1971," Journal of Human Resources, University of Wisconsin Press, vol. 13(1), pages 60-74.
    • Handle: RePEc:uwp:jhriss:v:13:y:1978:i:1:p:60-74
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    Cited by:

    1. Howard Gensler, 1997. "Welfare and the family size decision of low-income, two-parent families," Applied Economics Letters, Taylor & Francis Journals, vol. 4(10), pages 607-610.
    2. Dickert, Stacy & Houser, Scott & Scholz, John Karl, 1994. "Taxes and the Poor: A Microsimulation Study of Implicit and Explicit Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(3), pages 621-638, September.
    3. Riddell, Chris & Riddell, William Craig, 2021. "Welfare versus work under a negative income tax: Evidence from the Gary, Seattle, Denver and Manitoba income maintenance experiments," CLEF Working Paper Series 36, Canadian Labour Economics Forum (CLEF), University of Waterloo.

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