Utilization of Income Tax Credits by Low-Income Individuals

The Internal Revenue Service-a sub-agency that exists to collect revenue-has the task of administering and enforcing a wide array of social policy: from subsidies for college and child care expenses, to creating jobs in depressed areas, and assisting welfare recipients with employment. While these new or expanded credits represent a new paradigm in the delivery of social policy, little is known about who uses these programs and, equally important, who does not use these programs. Understanding utilization is a key to understanding how effective this means of transferring income is and whether we are reaching the targeted populations. This paper provides a framework for thinking about utilization of tax credits among low-income individuals, supported by existing research on credit utilization. With the existing data, it appears that utilization is by far the largest for the EITC, possibly because it is the oldest of these programs, the only refundable program, and the best targeted at low-income individuals. Utilization is low among low-income individuals in some tax credits because low-income individuals are not eligible. A redesign, including reducing complexity and administrative burdens or making these programs refundable, would result in the programs reaching those that they are ostensibly targeted towards. Conditional on being eligible, one common factor associated with increasing participation in many of these programs is a high benefit to cost ratio and sophistication with the tax system, whether that be through the use of a paid preparer, higher education levels, or experience with the tax system. Policymakers should think creatively about reducing filing burdens to increase participation, such as through wider use of electronic filing

The Role of Media Outreach and Program Modernization in the Growth of the SNAP Caseload

This research seeks to understand the role of information, in the form of media campaigns, and changes in transaction costs, in the form of online applications and call centers, in the growth in county-level SNAP caseloads. We find that SNAP radio advertisements are associated with a small increase in the SNAP caseload, though the magnitude of the estimates are sensitive to the econometric specification. The SNAP television ads, which were run only in 2006, are negatively correlated with caseloads. We find evidence of endogeneity in the placement of the advertising campaigns, leading to a positive bias in the estimated effect of the radio ad campaigns and a negative bias in the estimated effect of the TV ad campaigns. We also find the modernization policies are generally negatively correlated with caseloads, suggesting that providing information via the web and call centers did not successfully lower transaction costs in a uniform way that lead to higher SNAP participation.Supplemental Nutrition Assistance Program, SNAP, food stamps, food assistance, outreach, advertising, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, H53, I3,

Love at What Price? Estimating the Value of Marriage

Using a law within Social Security that provides clear financial incentives to delay marriage, we estimate the financial value of a month of marriage. Specifically, the law provides that widows who are eligible for Social Security benefits on their deceased spouse\u27s earnings records are eligible for benefits at age 60, unless they remarry before that age. If they remarry before that age, they cannot claim widow benefits and must wait until at least age 62 to claim spousal benefits on their new husband\u27s record, which are typically less generous than widow benefits. To generate an estimate of what this behavior implies about the value of marriage, we use data from five panels of the Survey of Income and Program Participation linked to administrative data from Social Security. We estimate the cost of marrying before age 60 imposed by the Social Security program. We develop a model that reflects the institutional details of Social Security and generate a likelihood function that reflects that model. By taking advantage of the variation in these costs and when or whether widows remarry before age 60, we estimate the benefit of marriage to be $8000/month. These estimates appear to be reasonable in the context of the short length of time widows are willing to wait and the high value of Social Security benefits

Employee-Based Versus Employer-Based Subsidies to Low-Wage Workers: A Public Finance Perspective

We revisit the relative merits of employee-based versus employer-based labor market subsidies. While conventional analyses stress the equivalence of these approaches, we find a modest preference for employee-based approaches. Because the population of low-wage workers overlaps, but is not identical to, the populations of low-skill or low-income workers, simple employer-based approaches are likely to be poorly targeted. Targeting may be improved by identification of eligible workers, but identification itself raises the possibility of detrimental stigma associated with the program. When combined with lower participation rates among firms than among households, the size of employer-based subsidies needed to match the outcome of an employee-based subsidy becomes quite large. We review the empirical performance of major subsidy programs. We find that employer-based programs have been characterized by low participation rates and relatively little success. In contrast, the Earned Income Tax Credit appears relatively successful in targeting the desired population, inducing additional labor market participation, and raising incomes

How Well Can We Track Cohabitation Using the SIPP? A Consideration of Direct and Inferred Measures

Cohabitation is an alternative to marriage and to living independently for an increasing number of Americans. Despite this fact, research exploring links between living arrangements and economic behavior is limited by a lack of data that explicitly identify cohabiting couples. To aid researchers in using the Survey of Income and Program Participation (SIPP) rich data for cohabitation issues, our paper considers direct and inferred measures of cohabitation. Our findings suggest that: (1) the best inferred measures in pre-1966 SIPP depends upon a researcher\u27s goals, and (2) the SIPP counts a larger number of cohabiting couples than the widely used CPS

Slippery When Wet: The Effects of Local Alcohol Access Laws on Highway Safety

This paper examines 237 instances of policy changes related to alcohol sales and consumption enacted in Texas communities between 1975 and 1996 to determine their effect on the incidence of alcohol-related motor vehicle accidents. These policies are categorized by location where the alcohol is consumed after sale (on the premises or off) and the type of alcohol available for consumption (beer and wine or hard liquor). After controlling for both county and year fixed effects, we find evidence that (i) the sale of alcohol for consumption on the premises (in bars and restaurants) is associated with a sizeable increase in alcohol-related motor vehicle accidents, (ii) the sale of alcohol (in liquor stores) for consumption off the premises may actually decrease expected accidents, and (iii) the sale of higher proof alcohol (hard liquor) presents greater risk to highway safety

Helping the Working Poor: Employer- vs. Employee-Based Subsidies

In the United States and Europe there has been renewed interest in subsidizing firms that employ disadvantaged workers as a means of addressing poverty and other social problems. In contrast, the prevailing practice is largely to provide social welfare benefits directly to individuals. Which approach is better? We re-examine the relative merits of employee- versus employer-based labor market subsidies and conclude there are good reasons to continue to rely on the direct, employee-based approach. In practice, low-wage workers are seldom either low-skill or low-income workers. Furthermore, workers who might quality for a firm-based subsidy are reluctant to so identify themselves for fear of being stigmatized or labeled as needy. Thus, employer-based subsidy programs have lower participation rates and correspondingly higher per capita expenditures than employee-based subsidy programs

Social Security and Divorce Decisions

People who have divorced are entitled to Social Security spousal benefits if their marriages lasted at least ten years. This paper uses 1985–1995 Vital Statistics data and the 2008–2011 American Community Surveys to analyze how this rule affects divorce decisions. I find evidence that the ten-year rule results in a small increase in divorces for the general population; however, the effects vary greatly by age. Divorce decisions change very little for people under the age of 35. For people 55 and older, however, divorces increase by approximately 20 percent around the ten-year cutoff, which leads to an increase in the likelihood of being divorced of 11.7 percent at ten years of marriage. For people between the ages of 35 and 55, who account for over half of divorces, the likelihood of being divorced increases by almost 6 percent as marriages cross the ten-year mark. This heterogeneity across ages likely exists because older people are more focused on retirement and have less time to remarry. These results indicate many people delay divorcing because they need Social Security benefits