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The Impact of the Earned Income Tax Credit on Economic Well-being: A Comparison across Household Types
Economics Faculty Working Papers
  • Jill Tiefenthaler, Wake Forest University
  • Nicole B Simpson, Colgate University
  • Jameson Hyde, Colgate University
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Working Paper
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Using survey data from Earned Income Tax Credit (EITC) recipients in Madison County, New York, we evaluate the effectiveness of the EITC in improving the economic well-being of low-income households. In particular, we examine the impact of the EITC across household types. For tax years 2002 through 2004, we find that the EITC is responsible for significantly lowering the poverty rate of the sample, from 57 to 49 percent. The EITC has the largest impact on single parent households, lowering their poverty rate by 11.2 percentage points. However, the EITC has negligible effects on the poorest households in the sample – childless singles. A majority (64 percent) of EITC recipients intends to use at least some of the refund on basic needs and almost half plan on using part of their refund for debt repayment. This suggests that the EITC helps the majority of recipients get by but not necessarily move toward economic independence. Somewhat surprisingly, single parent households in the sample are not that different from married parent households in terms of EITC amounts, poverty rates, use of credit, and participation in government programs, despite earning less.
The authors are grateful for the excellent comments received from Marsha Blumenthal and Susan Wieler. We also thank Joanne Passineau at the IRS in Albany, NY for supplying us with some of the EITC statistics. All errors are our own.
Citation Information
Jill Tiefenthaler, Nicole B Simpson and Jameson Hyde. "The Impact of the Earned Income Tax Credit on Economic Well-being: A Comparison across Household Types" (2008)
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