Single Mothers’ EITC Receipt Dynamics

Abstract

This paper uses a 1987-2006 panel of tax returns to examine how EITC claiming behavior among single mothers changed following the 1990s EITC expansions and the passage of welfare reform. We find that the continuation rate of being a claimant increased, while exits to non-primary-filer status decreased (particularly among longer-term claimants). Entrants from non-primary-filer status increased as well. We find that the increase in the EITC maximum helps to explain much of the increase in continuation rates, while the reduction in AFDC/TANF maximum benefits and the increase in maximum EITC amounts help to explain the decrease in exits to non-primary-filer.

Keywords: Earned Income Tax Credit, Single Mothers, Markov Chain

JEL Classification: H31, H24