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Trends in Cumulative Marginal Tax Rates Facing Low-Income Families, 1997-2007

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  • Gizem Kosar
  • Robert A. Moffitt

Abstract

We present new calculations of cumulative marginal tax rates (MTRs) facing low income families participating in multiple welfare programs over the period 1997-2007, the period after 1996 welfare reform but before the program expansions of the Great Recession. Our calculations are for nondisabled, nonelderly families who pay federal and state income taxes and the payroll tax but receive benefits from up to four different transfer programs—Medicaid, Food Stamps, subsidized housing, and Temporary Assistance for Needy Families. The results show enormous variation in MTRs across families who participate in different combinations of welfare programs, who have different family structures, and who have earnings in different ranges. For families who participate in either no or fewer than two welfare programs, which constitutes the large majority of low income families, MTRs are either negative or positive but modest in magnitude. But families participating in two or more programs, while still facing negative or modest positive rates at low earnings, usually face considerably higher MTRs at higher earnings ranges, often up to 80 percent and even occasionally over 100 percent. While the fraction of families in this category is not large, they constitute about one-fifth of single parent families.

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  • Gizem Kosar & Robert A. Moffitt, 2016. "Trends in Cumulative Marginal Tax Rates Facing Low-Income Families, 1997-2007," NBER Working Papers 22782, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22782
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    1. Congressional Budgete Office, 2012. "Effective Marginal Tax Rates for Low- and Moderate-Income Workers," Reports 43709, Congressional Budget Office.
    2. Robert A. Moffitt, 2016. "Economics of Means-Tested Transfer Programs in the United States, Volume 2," NBER Books, National Bureau of Economic Research, Inc, number moff-3, October.
    3. Robert A. Moffitt, 2016. "Economics of Means-Tested Transfer Programs in the United States, Volume 1," NBER Books, National Bureau of Economic Research, Inc, number moff14-1, October.
    4. Congressional Budget Office, 2015. "Effective Marginal Tax Rates for Low- and Moderate-Income Workers in 2016," Reports 50923, Congressional Budget Office.
    5. Congressional Budgete Office, 2012. "Effective Marginal Tax Rates for Low- and Moderate-Income Workers," Reports 43709, Congressional Budget Office.
    6. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 1039-1073.
    7. Congressional Budgete Office, 2012. "Effective Marginal Tax Rates for Low- and Moderate-Income Workers," Reports 43709, Congressional Budget Office.
    8. Congressional Budget Office, 2015. "Effective Marginal Tax Rates for Low- and Moderate-Income Workers in 2016," Reports 50923, Congressional Budget Office.
    9. Congressional Budget Office, 2015. "Effective Marginal Tax Rates for Low- and Moderate-Income Workers in 2016," Reports 50923, Congressional Budget Office.
    10. Congressional Budgete Office, 2012. "Effective Marginal Tax Rates for Low- and Moderate-Income Workers," Reports 43709, Congressional Budget Office.
    11. Maag, Elaine & Steuerle, C. Eugene & Chakravarti, Ritadhi & Quakenbush, Caleb, 2012. "How Marginal Tax Rates Affect Families at Various Levels of Poverty," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(4), pages 759-782, December.
    12. Congressional Budget Office, 2015. "Effective Marginal Tax Rates for Low- and Moderate-Income Workers in 2016," Reports 50923, Congressional Budget Office.
    13. repec:mpr:mprres:5032 is not listed on IDEAS
    14. Amy Finkelstein & Nathaniel Hendren & Erzo F. P. Luttmer, 2019. "The Value of Medicaid: Interpreting Results from the Oregon Health Insurance Experiment," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2836-2874.
    15. Moffitt, Robert A. (ed.), 2016. "Economics of Means-Tested Transfer Programs in the United States, Volume II," National Bureau of Economic Research Books, University of Chicago Press, number 9780226392493, October.
    16. Congressional Budgete Office, 2012. "Effective Marginal Tax Rates for Low- and Moderate-Income Workers," Reports 43709, Congressional Budget Office.
    17. Allison Barrett & Anni Poikolainen, "undated". "Food Stamp Program Participation Rates: 2004," Mathematica Policy Research Reports a89abf99c78a4b85b2406006b, Mathematica Policy Research.
    18. Moffitt, Robert A. (ed.), 2016. "Economics of Means-Tested Transfer Programs in the United States, Volume I," National Bureau of Economic Research Books, University of Chicago Press, number 9780226370477, October.
    19. Congressional Budget Office, 2015. "Effective Marginal Tax Rates for Low- and Moderate-Income Workers in 2016," Reports 50923, Congressional Budget Office.
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    Cited by:

    1. Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2017. "Optimal Tax Progressivity: An Analytical Framework," The Quarterly Journal of Economics, Oxford University Press, vol. 132(4), pages 1693-1754.
    2. Moffitt, Robert & Ziliak, James, 2020. "COVID-19 and the U.S. Social Safety Net," Economics Working Paper Archive 64317, The Johns Hopkins University,Department of Economics.
    3. Robert A. Moffitt & James P. Ziliak, 2020. "COVID‐19 and the US Safety Net," Fiscal Studies, John Wiley & Sons, vol. 41(3), pages 515-548, September.
    4. McKernan, Signe-Mary & Ratcliffe, Caroline & Braga, Breno, 2021. "The effect of the US safety net on material hardship over two decades," Journal of Public Economics, Elsevier, vol. 197(C).
    5. Yu-Ling Chang & Chi-Fang Wu, 2021. "Examining Low-Income Single-Mother Families’ Experiences with Family Benefit Packages during and after the Great Recession in the United States," JRFM, MDPI, vol. 14(6), pages 1-19, June.
    6. Hilary W. Hoynes & Diane Whitmore Schanzenbach, 2018. "Safety Nets Investments in Children," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 49(1 (Spring), pages 89-150.
    7. Dan A. Black & Lars Skipper & Jeffrey A. Smith & Jeffrey Andrew Smith, 2023. "Firm Training," CESifo Working Paper Series 10268, CESifo.
    8. Bastian, Jacob E. & Jones, Maggie R., 2021. "Do EITC expansions pay for themselves? Effects on tax revenue and government transfers," Journal of Public Economics, Elsevier, vol. 196(C).

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    More about this item

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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