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A Good Policy Gone Bad: The Strange Case of the Non-Refundable State EITC

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Author Info
Saul D. Hoffman () (Department of Economics,University of Delaware)

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Abstract

Twenty states and several cities have adopted their own EITC programs, typically piggy-backing on the federal EITC by offering benefits equal to some designated proportion of the federal benefits. In all but four states, the state EITC is fully refundable, just like the Federal EITC. Using the example of Delaware, which adopted a non-refundable EITC in 2006, I show the peculiar distribution effects of such a policy. Roughly the lower income half of the EITC recipient population is ineligible for the Delaware non-refundable EITC. Married couples and both single-parent and two-parent families with less than two children also often lose eligibility and/or a substantial portion of benefits. The average benefit received by Federal EITC recipients falls by almost two-thirds. It is likely that these impacts of EITC non-refundability results would hold in other states considering such a policy.

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File URL: http://www.lerner.udel.edu/economics/WorkingPapers/2007/UDWP2007-06.pdf
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Publisher Info
Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 07-06.

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Length: 18 pages
Date of creation: Apr 2007
Date of revision:
Publication status: Published in State Tax Notes, Vol. 44, No. 8, pp. 551-558, May 21, 2007.
Handle: RePEc:dlw:wpaper:07-06.

Contact details of provider:
Postal: Purnell Hall, Newark, Delaware 19716
Fax: (302) 831-6968
Web page: http://www.lerner.udel.edu/departments/economics/
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For technical questions regarding this item, or to correct its listing, contact: (Saul Hoffman).

Related research
Keywords: EITC; Earned Income Tax Credit;

Find related papers by JEL classification:
H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Health, Education, and Welfare
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
I39 - Health, Education, and Welfare - - Welfare and Poverty - - - Other

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This page was last updated on 2009-11-27.

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