Minnesota’s Earned Income Credit Program Utilization by Current and Former Welfare Households and the Impact of Policy Par...
How Much Do Welfare Recipients Use Earned Income Credits and When Do They Use It? <ul><li>Is the Credit Utilized?  If so, ...
Starting With The Conclusions <ul><li>Significant Differences Between Receipt & Participation </li></ul><ul><li>May in Par...
Background On Why It Matters <ul><li>Many Dollars, Many People  </li></ul><ul><li>Federal & State EICs May Have Had A Role...
Why It Matters  (a) Many Dollars, Many People <ul><li>U.S. : 6.3 Mill. Claimed in 2001 </li></ul><ul><ul><li>$2.7 Billion,...
<ul><li>A Network of Support </li></ul><ul><ul><li>Tax Assistance Centers & Paid Tax Preparers </li></ul></ul><ul><ul><li>...
Why It Matters  (b) Those Welfare Reform Years <ul><li>About 30,000 Recipients in 2010 </li></ul>
Why It Matters  (c) $1,500-$2,000; Provides Incentive to Work; MN May Address Cliff In Income
<ul><li>Higher Employment Probabilities For Single Mothers </li></ul><ul><li>Lower Poverty Rates </li></ul><ul><li>Lower C...
Why It Matters  (c) State EICs Are On The Map Source:  Center for Budget And Policy Priorities
Why It Matters Increasing Number of States With EICs Colorado’s EIC was suspended in 2002-2005 and in 2005, by ballot the ...
<ul><li>Potential of More Budget Deficits Incurred By States </li></ul><ul><ul><li>Historically Rising Medicaid Costs For ...
Background To MN’s EIC 5 Segments
DATA <ul><li>Person-Year Data on AFDC or TANF/MFIP (1992-1999) </li></ul><ul><ul><li>1-or More Months Deemed as Received A...
Receipt Versus Participation <ul><li>Look At Literature Review Conclusions </li></ul><ul><ul><li>Gap in Knowledge About Ho...
Receipt Versus Participation 37.7% Receive, 64.6% Participate
Timing & Characteristics of Receipt or WGO? Percentages Are Not Uniformly Low:  Instead, Rise With Earnings
Timing & Characteristics of Receipt or WGO? Most Eventually Take-Up the EIC
<ul><li>Cross-Tabs of Markov Process From 1998-1999 Suggest That Although Chaotic, Projections Over 5 Years, Some Converge...
<ul><li>Non-Whites, Parents W/O A High School Diploma, and Teen Parents Tend to Have Lower or No Earnings </li></ul><ul><l...
Regression Model
Regression Results Parent’s Response to Parameters ?  /  /  ? Phase-Out Rate ?  /  /  ? Floor to Phase-Out ?  /  /  ? 2 nd...
Regression Results Addendum Out Migration May Affect Rates North Dakota South Dakota ? Iowa ? Wisconsin ? Canada TAKE-UP R...
Regression Results Addendum Who More Likely Receives Or Participates Statewide Unemployment Percentage Age of Household He...
Why Are These Results Important? <ul><li>Much Money and Many People Are Involved In the Delivery of Federal and State Earn...
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Hirasuna Presentation On Earned Income Credits Use By Durrent And Former Welfare Recipients

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Summary of paper published in the Natonal Tax Journal

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Transcript of "Hirasuna Presentation On Earned Income Credits Use By Durrent And Former Welfare Recipients"

  1. 1. Minnesota’s Earned Income Credit Program Utilization by Current and Former Welfare Households and the Impact of Policy Parameters
  2. 2. How Much Do Welfare Recipients Use Earned Income Credits and When Do They Use It? <ul><li>Is the Credit Utilized? If so, by Whom? </li></ul><ul><li>Appropriate Measures of Utilization Depends Upon The Policy Goals </li></ul><ul><li>Do We Look at All Current and Former Recipients? Or, Just those Eligible? </li></ul>
  3. 3. Starting With The Conclusions <ul><li>Significant Differences Between Receipt & Participation </li></ul><ul><li>May in Part Relate to the Timing of When Parents Exit Welfare And When They Find Work </li></ul><ul><li>Parents May Respond to Changes In the Generosity of the Credit </li></ul>
  4. 4. Background On Why It Matters <ul><li>Many Dollars, Many People </li></ul><ul><li>Federal & State EICs May Have Had A Role In Welfare Reform </li></ul><ul><li>State EICs Are An Increasingly Popular Tool </li></ul><ul><li>It May Be Effective </li></ul><ul><li>Turbulent Times Ahead? </li></ul>
  5. 5. Why It Matters (a) Many Dollars, Many People <ul><li>U.S. : 6.3 Mill. Claimed in 2001 </li></ul><ul><ul><li>$2.7 Billion, $440/claimant* </li></ul></ul><ul><li>CALIFORNIA : 2.5 mill. families (12% of taxpayers) Claimed Federal EIC in 2008** </li></ul><ul><li>MINNESOTA : .3 mill. claimants, (app. 11% of all filers) in 2007*** </li></ul><ul><ul><li>$523 mil. fed. EIC, and $163 Mill. state EIC,, avg. State EIC=$565/claimant. </li></ul></ul>*U.S. Green Book (2004); **PPIC (2010), ***House Research, MN House of Rep. (2010)
  6. 6. <ul><li>A Network of Support </li></ul><ul><ul><li>Tax Assistance Centers & Paid Tax Preparers </li></ul></ul><ul><ul><li>Cross-Organization Groups to Assist in Take-Up (e.g., Distribute Flyers in Foreign Languages & training of tax preparers) </li></ul></ul><ul><ul><li>Non-Profit Advocates & Researchers </li></ul></ul><ul><ul><li>Federal, State and Local Government Staff, Administrators, Commissioners & Legislators </li></ul></ul><ul><ul><li>Academic Researchers </li></ul></ul>Why It Matters (a) Many Dollars, Many People
  7. 7. Why It Matters (b) Those Welfare Reform Years <ul><li>About 30,000 Recipients in 2010 </li></ul>
  8. 8. Why It Matters (c) $1,500-$2,000; Provides Incentive to Work; MN May Address Cliff In Income
  9. 9. <ul><li>Higher Employment Probabilities For Single Mothers </li></ul><ul><li>Lower Poverty Rates </li></ul><ul><li>Lower Chances of Reentering Welfare </li></ul><ul><li>Higher Chances of Exiting TANF (??) </li></ul><ul><li>80-86 percent take-up rates </li></ul>Why It Matters (d) It May Be Effective
  10. 10. Why It Matters (c) State EICs Are On The Map Source: Center for Budget And Policy Priorities
  11. 11. Why It Matters Increasing Number of States With EICs Colorado’s EIC was suspended in 2002-2005 and in 2005, by ballot the State was authorized capture tax revenue above the Tabor Limit.
  12. 12. <ul><li>Potential of More Budget Deficits Incurred By States </li></ul><ul><ul><li>Historically Rising Medicaid Costs For Elderly </li></ul></ul><ul><ul><li>Rising Energy Costs </li></ul></ul><ul><ul><li>Slow Employment Growth </li></ul></ul>Why It Matters (e) Turbulent Times Ahead?
  13. 13. Background To MN’s EIC 5 Segments
  14. 14. DATA <ul><li>Person-Year Data on AFDC or TANF/MFIP (1992-1999) </li></ul><ul><ul><li>1-or More Months Deemed as Received AFDC/TANF </li></ul></ul><ul><li>Merged by SSN </li></ul><ul><ul><li>State Income Tax Records (1992-1999) </li></ul></ul><ul><ul><li>Covered Earnings (1995-1999) </li></ul></ul><ul><li>Merged by County </li></ul><ul><ul><li>ES-202 Data </li></ul></ul>
  15. 15. Receipt Versus Participation <ul><li>Look At Literature Review Conclusions </li></ul><ul><ul><li>Gap in Knowledge About How Many Current & Former Welfare Recipients Receive Earned Income Credits </li></ul></ul><ul><li>Different Concepts of Utilization </li></ul><ul><ul><li>Participation Includes Uniformed & Others That Find It Too Costly To Claim The EIC </li></ul></ul><ul><ul><li>Receipt Includes the Unemployed </li></ul></ul><ul><li>Legislators May Want to Know </li></ul>
  16. 16. Receipt Versus Participation 37.7% Receive, 64.6% Participate
  17. 17. Timing & Characteristics of Receipt or WGO? Percentages Are Not Uniformly Low: Instead, Rise With Earnings
  18. 18. Timing & Characteristics of Receipt or WGO? Most Eventually Take-Up the EIC
  19. 19. <ul><li>Cross-Tabs of Markov Process From 1998-1999 Suggest That Although Chaotic, Projections Over 5 Years, Some Converge to Earnings Above EIC Limits </li></ul><ul><li>Examining Parents Observed on Welfare In 1992: 25% Had Earnings of $7,000 or Less </li></ul>Timing & Characteristics of Receipt or WGO? Most Do, But Some Take-Up More Slowly
  20. 20. <ul><li>Non-Whites, Parents W/O A High School Diploma, and Teen Parents Tend to Have Lower or No Earnings </li></ul><ul><li>American Indians Tend to Participate Less </li></ul><ul><li>From Kaplan-Meier Estimates: Non-Whites and Persons W/O a High School Diploma Take Longer To Take-Up EIC </li></ul>Timing & Characteristics of Receipt or WGO? Most Do, But Some Take-Up More Slowly
  21. 21. Regression Model
  22. 22. Regression Results Parent’s Response to Parameters ? / / ? Phase-Out Rate ? / / ? Floor to Phase-Out ? / / ? 2 nd Tier Max. Credit ? / ? ? / 2 nd Tier Phase-In Rate ? / / ? Earnings Floor to 2 nd Tier ? / / ? 1 st Tier Max. Credit / ? / ? 1 st Tier Phase-In Rate / / Maximum Credit Only TAKE-UP RECEIPT VARIABLE
  23. 23. Regression Results Addendum Out Migration May Affect Rates North Dakota South Dakota ? Iowa ? Wisconsin ? Canada TAKE-UP RECEIPT VARIABLE Interacted With Year Since Last on Welfare
  24. 24. Regression Results Addendum Who More Likely Receives Or Participates Statewide Unemployment Percentage Age of Household Head Did Not Graduate HS Native American Hispanic African American Asian American TAKE-UP RECEIPT VARIABLE
  25. 25. Why Are These Results Important? <ul><li>Much Money and Many People Are Involved In the Delivery of Federal and State Earned Income Credits: Are They Effective? </li></ul><ul><li>Analysis of Take-up Should Consider the Goals of the Policy </li></ul><ul><li>Fills a Gap in Information About Current and Former Welfare Recipients </li></ul><ul><ul><li>Use at a lower Rate </li></ul></ul><ul><ul><li>Utilization Increases With Time and income </li></ul></ul><ul><ul><li>Those With Work Barriers May Utilize at Slower Rates </li></ul></ul>
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