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EITC Eligibility, Participation, and Compliance Rates for AFDC Households: Evidence from the California Caseload

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  • Carolyn J. Hill
  • V. Joseph Hotz
  • Charles H. Mullin
  • John Karl Scholz

Abstract

In this report, we examine the eligibility for and participation in the earned income tax credit (EITC) for low-income families in California during the 1990s. The EITC is a federal in-come tax credit available to working poor families, with the amount of credit determined by the number of eligible children and by family income. The EITC has become the largest cash or near-cash program available to low-income families in the U.S., making it one of the corner-stones of the nation’s antipoverty effort. The effectiveness of the EITC depends, in part, on whether those who are eligible for the credit actually receive it and whether it is actually claimed. We examine EITC eligibility, participation and non-compliance rates for a special group of potential EITC beneficiaries, namely low-income households in California who received AFDC during the 1990s. Our sample consists of AFDC assistance units from four counties—Alameda, Los Angeles, San Bernardino and San Joaquin—that were part of the California Work Pays Demonstration Project (CWPDP), a waiver demonstration to assess the impacts of a series of reforms to the AFDC program in the state. For this sample we have data from administrative records from county welfare offices on AFDC participation, AFDC payments and the income re-ported to county welfare departments for the purpose of determining AFDC payments. These data were supplemented with quarterly wage and salary information from the state’s unemploy-ment insurance records as well as taxable income, by source, and EITC credits from federal in-come tax returns for the years 1993 and 1994. The latter information was obtained by matching state unemployment insurance wage earnings records and IRS tax returns data for the adults in the assistance units included in the demonstration project.

Suggested Citation

  • Carolyn J. Hill & V. Joseph Hotz & Charles H. Mullin & John Karl Scholz, 1999. "EITC Eligibility, Participation, and Compliance Rates for AFDC Households: Evidence from the California Caseload," JCPR Working Papers 102, Northwestern University/University of Chicago Joint Center for Poverty Research.
  • Handle: RePEc:wop:jopovw:102
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    References listed on IDEAS

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    1. Jeffrey B. Liebman, 2000. "Who are the Ineligible EITC Recipients?," JCPR Working Papers 131, Northwestern University/University of Chicago Joint Center for Poverty Research.
    2. Rebecca M. Blank & Patricia Ruggles, 1993. "When Do Women Use AFDC & Food Stamps? The Dynamics of Eligibility vs. Participation," NBER Working Papers 4429, National Bureau of Economic Research, Inc.
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    Cited by:

    1. V. Joseph Hotz & Charles H. Mullin & John Karl Scholz, 2001. "The Earned Income Tax Credit and Labor Market Participation of Families on Welfare," JCPR Working Papers 214, Northwestern University/University of Chicago Joint Center for Poverty Research.
    2. Kopczuk, Wojciech & Pop-Eleches, Cristian, 2007. "Electronic filing, tax preparers and participation in the Earned Income Tax Credit," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1351-1367, August.
    3. Hirasuna, Donald P. & Stinson, Thomas F., 2004. "Urban And Rural Differences In Utilization Of State Earned Income Tax Credit Programs: Minnesota'S Experience," Working Papers 18912, Oregon State University, Rural Poverty Research Center (RPRC).
    4. V. J. Hotz & J. K. Scholz, "undated". "Measuring Employment and Income for Low-Income Populations with Administrative and Survey Data," Institute for Research on Poverty Discussion Papers 1224-01, University of Wisconsin Institute for Research on Poverty.

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