Abstract

http://ssrn.com/abstract=2320178
 


 



EITC as Income (In)Stability?


Kerry A. Ryan


Saint Louis University School of Law

August 25, 2013

15 Fla. Tax Rev. 583 (2014)
Saint Louis U. Legal Studies Research Paper No. 2013-23

Abstract:     
Congress enacted the Earned Income Tax Credit (EITC), inter alia, to entice poor single mothers to work (or work more) as a means of lifting themselves out of poverty. Its design as a wage subsidy that phases out at higher earnings levels is intended to accomplish this goal. A strong labor market is crucial to the success of work-based benefit programs, such as the EITC. The EITC can motivate female household heads to work (or work more), but they cannot act on that motivation if no jobs or additional working hours exist. This Article demonstrates that during economic downturns, the EITC wage subsidy contributes to, rather than prevents, poverty in single-mother families. Lost EITC benefits exacerbate recession-induced earnings losses, a phenomenon this Article refers to as income destabilization. In contrast, the EITC stabilizes the incomes of its wealthier beneficiaries as increased credit amounts offset underlying salary declines. While this pattern of income (de)stabilization is an unintended byproduct of the design of the EITC as a targeted wage subsidy, its negative impact on the economic welfare of female-headed households is problematic, given that these same families are the historically targeted program beneficiaries. This Article offers a narrowly tailored proposal that alters the structure of the EITC during recessionary periods in order to prevent EITC-induced income destabilization.

Number of Pages in PDF File: 66

Keywords: EITC, Earned Income Tax Credit, Income Stabilization, Automatic Stabilization

JEL Classification: E62, H20, H53, I38, K34

Accepted Paper Series





Download This Paper

Date posted: September 4, 2013 ; Last revised: April 26, 2014

Suggested Citation

Ryan, Kerry A., EITC as Income (In)Stability? (August 25, 2013). 15 Fla. Tax Rev. 583 (2014); Saint Louis U. Legal Studies Research Paper No. 2013-23. Available at SSRN: http://ssrn.com/abstract=2320178

Contact Information

Kerry A. Ryan (Contact Author)
Saint Louis University School of Law ( email )
100 N. Tucker Blvd.
St. Louis, MO 63108
United States
3149777237 (Phone)
3149773332 (Fax)
HOME PAGE: http://law.slu.edu/

Feedback to SSRN


Paper statistics
Abstract Views: 421
Downloads: 81
Download Rank: 185,435
People who downloaded this paper also downloaded:
1. Property Taxes and Their Limits: Evidence from New York City
By Andrew Hayashi

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.328 seconds