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The Earned Income Tax Credit and Reported Self-Employment Income

  • LaLumia, Sara

The EITC subsidizes earnings from both wages and self–employment. This paper uses tax return data to investigate how the EITC affects the reporting of self–employment income to the IRS. A difference–in–difference strategy is used, considering three EITC expansions and comparing filers with and without children. Expansions are predicted to increase the reporting of self–employment income in the phase–in region and to reduce it in the phase–out region. Among the lowest–income filers, the 1994 expansion is associated with a significant increase in the probability of reporting positive self–employment income, equal to 3.2 percentage points for unmarried filers and 4.1 percentage points for married filers.

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Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 62 (2009)
Issue (Month): 2 (June)
Pages: 191-217

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Handle: RePEc:ntj:journl:v:62:y:2009:i:2:p:191-217
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  1. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
  2. Julie Berry Cullen & Roger Gordon, 2006. "Tax Reform and Entrepreneurial Activity," NBER Chapters, in: Tax Policy and the Economy, Volume 20, pages 41-72 National Bureau of Economic Research, Inc.
  3. Raj Chetty & Emmanuel Saez, 2013. "Teaching the Tax Code: Earnings Responses to an Experiment with EITC Recipients," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 1-31, January.
  4. Nzinga Broussard & Ralph Chami & Gregory Hess, 2003. "(Why) Do Self-Employed Parents Have More Children?," CESifo Working Paper Series 1103, CESifo Group Munich.
  5. Nada Eissa & Jeffrey B. Liebman, 1995. "Labor Supply Response to the Earned Income Tax Credit," NBER Working Papers 5158, National Bureau of Economic Research, Inc.
  6. Bruce D. Meyer & Dan T. Rosenbaum, 2001. "Welfare, The Earned Income Tax Credit, And The Labor Supply Of Single Mothers," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 1063-1114, August.
  7. 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.
  8. Blau, David M, 1987. "A Time-Series Analysis of Self-employment in the United State," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 445-67, June.
  9. Bruce, Donald, 2000. "Effects of the United States tax system on transitions into self-employment," Labour Economics, Elsevier, vol. 7(5), pages 545-574, September.
  10. Slemrod, Joel, et al, 1997. "April 15 Syndrome," Economic Inquiry, Western Economic Association International, vol. 35(4), pages 695-709, October.
  11. R. Glenn Hubbard & William M. Gentry, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, vol. 90(2), pages 283-287, May.
  12. Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May.
  13. Jeffrey B. Liebman, 2000. "Who are the Ineligible EITC Recipients?," JCPR Working Papers 131, Northwestern University/University of Chicago Joint Center for Poverty Research.
  14. repec:cup:cbooks:9780521828130 is not listed on IDEAS
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