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Do In-Work Tax Credits Serve as a Safety Net?

Author

Listed:
  • Marianne Bitler
  • Hilary Hoynes
  • Elira Kuka

Abstract

We test the EITC’s response to economic need. Using IRS data we exploit differences in timing and severity of economic cycles across states. Because the EITC requires earned income, there is a theoretical ambiguity in the credit’s cyclicality. We find higher unemployment leads to increased likelihood of EITC recipiency and in credit amounts received for married couples but has insignificant effects for single individuals. The EITC’s protective effects are concentrated among skilled workers. The EITC mitigates income shocks for married couples with children and groups likely to have moderate earnings, but does not for most recipients: single parents with children.

Suggested Citation

  • Marianne Bitler & Hilary Hoynes & Elira Kuka, 2017. "Do In-Work Tax Credits Serve as a Safety Net?," Journal of Human Resources, University of Wisconsin Press, vol. 52(2), pages 319-350.
    • Handle: RePEc:uwp:jhriss:v:52:y:2017:i:2:p:319-350
    Note: DOI: 10.3368/jhr.52.2.0614-6433R1
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    File URL: http://jhr.uwpress.org/cgi/reprint/52/2/319
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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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