Tax Policy Toward Low-Income Families

Hoynes, Hilary; Rothstein, Jesse

doi:10.3386/w22080

Cited by 18 publications

(3 citation statements)

References 21 publications

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“…The CTC subsidy to work remains flat at $4,000 as income rises, while the EITC subsidy falls and reaches zero at $47,440. Others have noted the common feature of the EITC and CTC in encouraging work among parents (e.g., Holt and Maag 2009;Greenstein 2015;Hoynes and Rothstein 2016;Moffitt 2016).…”

Section: Changes In Work Incentives Due To the Child Allowancementioning

confidence: 99%

The Anti-Poverty, Targeting, and Labor Supply Effects of Replacing a Child Tax Credit with a Child Allowance

Corinth¹,

Meyer²,

Stadnicki³

et al. 2021

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The replacement of the Child Tax Credit (CTC) with a child allowance has been advocated by numerous policymakers and researchers. We estimate the anti-poverty, targeting, and labor supply effects of such a change by linking survey data with administrative tax and government program data which form part of the Comprehensive Income Dataset (CID). We focus on the provisions of the 2021 Build Back Better Act, which would have increased maximum benefit amounts to $3,000 or $3,600 per child (up from $2,000 per child) and made the full credit available to all low and middle-income families regardless of earnings or income. Initially ignoring any behavioral responses, we estimate that the replacement of the CTC would reduce child poverty by 34% and deep child poverty by 39%. The change to a child allowance would have a larger anti-poverty effect on children than any existing government program, though at a higher cost per child raised above the poverty line than any other means-tested program. Relatedly, the child allowance would allocate a smaller share of its total dollars to families at the bottom of the income distribution-as well as families with the lowest levels of long-term income, education, or health-than any existing means-tested program with the exception of housing assistance. We then simulate anti-poverty effects accounting for labor supply responses. By replacing the CTC (which contained substantial work incentives akin to the EITC) with a child allowance, the policy change would reduce the return to working at all by at least $2,000 per child for most workers with children. Relying on elasticity estimates consistent with mainstream simulation models and the academic literature, we estimate that this change in policy would lead 1.5 million workers (constituting 2.6% of all working parents) to exit the labor force. The decline in employment and the consequent earnings loss would mean that child poverty would only fall by at most 22% and deep child poverty would not fall at all with the policy change.

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Section: Changes In Work Incentives Due To the Child Allowancementioning

confidence: 99%

The Anti-Poverty, Targeting, and Labor Supply Effects of Replacing a Child Tax Credit with a Child Allowance

Corinth¹,

Meyer²,

Stadnicki³

et al. 2021

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“…There is a substantial amount of evidence about the effects of the U.S. EITC and Canadian NCB on family and child wellbeing over the past two decades and we discuss only some highlights of it here. For more comprehensive reviews of the effects of the changes in the social safety net, see the studies on welfare reform (e.g., Blank 2001, 2002, Grogger and Karoly 2005, Moffitt 2003, and Ziliak 2016 and the EITC (Hotz and Scholz, 2003, Nichols and Rothstein 2016, Hoynes and Rothstein 2016, Eissa and Hoynes 2006. In particular, studies show that the EITC leads to substantial increases in employment for single mothers (e.g., Eissa and Liebman 1996, Meyer and Rosenbaum 2000, 2001, Hoynes and Patel 2015 with little evidence that existing workers reduce hours worked.…”

Section: Previous Literaturementioning

confidence: 99%

How do the U.S and Canadian Social Safety Nets Compare for Women and Children?

Hoynes

Stabile

2017

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The past 25 years has seen substantial change in the social safety nets for families with children in the US and Canada. Both countries have moved away from cash welfare but the US has done so relying more exclusively on inwork benefits with work requirements. This paper examines this evolution across the two countries and examines the effects on employment and poverty. In particular, we focus on the two largest programs over this period: the U.S. EITC and the Canadian NCB/CCTB. In light of these policy changes, we examine trends in employment and poverty of the most affected families --single mothers with less than a college degree --across the two countries. We find that employment improved substantially in both countries, absolutely and relative to a control group of single women without children. The cross-country differences in relative trends are mainly explained by differences in the labor market conditions. Poverty rates for single mothers also declined in both countries with more of the decline coming through market income in the U.S. and benefit income in Canada.

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“…Currently, the Additional CTC provides a refundable credit equal to 15 percent of earnings above $3,000. This has significantly enhanced the benefits of the CTC for lower-income families (Hoynes & Rothstein, 2016).…”

Section: Child Tax Credit (Ctc)mentioning

confidence: 99%

Child Poverty, the Great Recession, and the Social Safety Net in the United States

Bitler

Hoynes

Kuka

2016

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In this paper, we comprehensively examine the effects of the Great Recession on child poverty, with particular attention to the role of the social safety net in mitigating the adverse effects of shocks to earnings and income. Using a state panel data model and data for 2000 to 2014, we estimate the relationship between the business cycle and child poverty, and we examine how and to what extent the safety net is providing protection to at-risk children. We find compelling evidence that the safety net provides protection; that is, the cyclicality of after-tax-and-transfer child poverty is significantly attenuated relative to the cyclicality of private income poverty. We also find that the protective effect of the safety net is not similar across demographic groups, and that children from more disadvantaged backgrounds, such as those living with Hispanic or single heads, or particularly those living with immigrant household heads-or immigrant spouses-experience larger poverty cyclicality than those living with non-Hispanic white or married heads, or those living with native household heads with native spouses. Our findings hold across a host of choices for how to define poverty. These include measures based on absolute thresholds or more relative thresholds. They also hold for measures of resources that include not only cash and near-cash transfers net of taxes but also several measures of the value of public medical benefits. C 2016 by the Association for Public Policy Analysis and Management.

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Tax Policy Toward Low-Income Families

Cited by 18 publications

References 21 publications

The Anti-Poverty, Targeting, and Labor Supply Effects of Replacing a Child Tax Credit with a Child Allowance

The Anti-Poverty, Targeting, and Labor Supply Effects of Replacing a Child Tax Credit with a Child Allowance

How do the U.S and Canadian Social Safety Nets Compare for Women and Children?

Child Poverty, the Great Recession, and the Social Safety Net in the United States

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