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

Summary of paper published in the Natonal Tax Journal

Published in News & Politics , Business
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Transcript

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