Why the EITC doesn't make work pay

Law and Contemporary Problems

Volumn 73, Issue 1, 2010, Pages 285-313

  Alstott, Anne L ^a  

^a DUKE UNIVERSITY   (United States)

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EID: 78149254372     PISSN: 00239186     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (100)

1. JOINT COMM. ON TAXATION, 110TH CONG., ESTIMATES OF FEDERAL TAX EXPENDITURES FOR FISCAL YEARS 2008-2012, at 73 (Comm. Print 2008).
2. Memorandum on the Earned Income Tax Credit, 1 PUB. PAPERS 413 (Mar. 9, 1994), available at http://www.presidency.ucsb.edu/ws/index.php?pid=49779.
3. STEVE HOLT, THE EARNED INCOME TAX CREDIT AT AGE 30: WHAT WE KNOW 13 (Brookings Inst., 2006), available at http://www.brookings.edu/~/media/Files/rc/reports/2006/02childrenfamilies_holt/20060209_Holt.pdf.
4. JOEL F. HANDLER & YEHESKEL HASENFELD, BLAME WELFARE, IGNORE POVERTY AND INEQUALITY 81 (2007) (noting bipartisan praise for the EITC).
5. Budget of the U.S. Gov't., Historical Tables tbl.11.3, available at http://www.whitehouse.gov/omb/budget/fy2009/pdf/hist.pdf. TANF was formerly known as the AFDC (Aid to Families with Dependent Children).
6. See Dennis J. Ventry, Jr., The Collision of Tax and Welfare Politics: The Political History of the Earned Income Tax Credit, in MAKING WORK PAY 15, 26-30 (Bruce D. Meyer & Douglas Holtz-Eakin eds., 2001).
7. see also CHRISTOPHER HOWARD, THE HIDDEN WELFARE STATE 64-74 (1999)
8. See, e.g., GREGORY ACS & MARGERY AUSTIN TURNER, MAKING WORK PAY ENOUGH: A DECENT LIVING STANDARD FOR WORKING FAMILIES (Urban Inst., New Safety Net Paper 1, 2008), available at http://www.urban.org/UploadedPDF/411710_work_pay.pdf.
9. For discussions of EITC design, see Anne L. Alstott, The Earned Income Tax Credit and the Limitations of Tax-Based Welfare Reform, 108 HARV. L. REV. 533 (1995).
10. David Weisbach & Jacob Nussim, The Integration of Tax and Spending Programs, 113 YALE L.J. 955 (2004).
11. Lawrence Zelenak, Tax or Welfare? The Administration of the Earned Income Tax Credit, 52 UCLA L. Rev. 1867 (2005).
12. For proposed reforms, see, for example, JASON FURMAN, CTR. ON BUDGET & POLICY PRIORITIES, TAX REFORM AND POVERTY 1 (2006), http://www.cbpp.org/files/4-10-06tax.pdf (proposing to expand the EITC for larger families and for the childless).
13. Janet McCubbin, Noncompliance with the Earned Income Tax Credit: The Determinants of the Misreporting of Children, in MAKING WORK PAY 237-73 (Bruce Meyer & Douglas Holtz-Eakin eds., 2002) (examining noncompliance and considering reforms to improve compliance).
14. JOHN KARL SCHOLZ, EMPLOYMENT-BASED TAX CREDITS FOR LOWSKILLED WORKERS 10-16, (Brookings Inst., Hamilton Project Discussion Paper No. 2007-14, 2007) (advocating an increased EITC for the childless and exploring its effects on work, crime, and marriage).
15. In other work, I have criticized wage subsidies (including the EITC) for adopting a work condition.
16. See Anne L. Alstott, Work vs. Freedom: A Liberal Challenge to Employment Subsidies, 108 YALE L.J. 967 (1999).
17. CTR. ON BUDGET & POLICY PRIORITIES, POLICY BASICS: THE EARNED INCOME TAX CREDIT (2008), http://www.cbpp.org/cms/?fa=view&id=2505.
18. See JOHN ICELAND, POVERTY IN AMERICA 21-28 (2006)
19. NICHOLAS EBERSTADT, THE POVERTY OF "THE POVERTY RATE" 93 (2008)
20. See David K. Shipler, A Poor Cousin of the Middle Class, N.Y. TIMES, Jan. 18, 2004, at 22, available at http://www.nytimes.com/2004/01/18/magazine/a-poor-cousin-of-the-middle-class.html (describing the work experience of Caroline Payne, a low-wage worker lacking front teeth, who often found herself relegated to back-office jobs).
21. Cf. ADAM SMITH, THE WEALTH OF NATIONS 288-89 (1776).
22. LEE RAINWATER & TIMOTHY M. SMEEDING, POOR KIDS IN A RICH COUNTRY 10 (2003).
23. See also AMARTYA SEN, THE IDEA OF JUSTICE 254-57 (2009) (emphasizing that the measurement of poverty in resource terms depends on the characteristics of each person and of the society in which she lives)
24. I assume that "making work pay" does imply that work for pay is properly the condition for the decent minimum
25. E.g., Stuart White, Freedom, Reciprocity, and the Citizen's Stake, in THE ETHICS OF STAKEHOLDING (Keith Dowding, Jurgen De Wispelaere & Stuart White eds., Palgrave Macmillan 2003).
26. See Mollie Orshansky, Children of the Poor, 26 SOC. SEC. BULL. 3 (1963).
27. Mollie Orshansky, Counting the Poor: Another Look at the Poverty Profile, 28 SOC. SEC. BULL. 3 (1965).
28. For analysis and alternative proposals, see generally PATRICIA RUGGLES, DRAWING THE LINE (1990)
29. MEASURING POVERTY: A NEW APPROACH (Constance F. Citro & Robert T. Michaels eds., Nat'l Acad. Press 1995).
30. JARED BERNSTEIN ET AL., ECON. POLICY INST., HARDSHIPS IN AMERICA (2001), http://www.epi.org/publications/entry/books_hardships (finding high rates of critical and serious hardship among families living under 200% of the poverty line).
31. HEATHER BOUSHEY & BETHNEY GUNDERSEN, WHEN WORK JUST ISN'T ENOUGH: MEASURING HARDSHIPS FACED BY FAMILIES AFTER MOVING FROM WELFARE TO WORK (Econ. Policy Inst. 2001), http://epi.3cdn.net/1e8ed164a4f6790a04_gpm6bxuig.pdf.
32. GREGORY ACS & AUSTIN NICHOLS, WORKING TO MAKE ENDS MEET 7-8 (Urban Inst. 2005), http://www.urban.org/UploadedPDF/311243_make_ends_meet.pdf.
33. U.S. CENSUS BUREAU, PEOPLE IN FAMILIES BELOW 200% OF POVERTY (2008), http://www.census.gov/hhes/www/macro/032008/pov/new02_200.htm
34. U.S. CENSUS BUREAU, PEOPLE IN FAMILIES BELOW 100% OF POVERTY (2008), http://www.census.gov/hhes/www/macro/032008/pov/new02_100_01.htm.
35. U.S. CENSUS BUREAU, POVERTY THRESHOLDS FOR 2007 (2008), http://www.census.gov/hhes/www/poverty/threshld/thresh07.html.
36. See CARMEN DENAVAS-WALT ET AL., U.S. CENSUS BUREAU, INCOME, POVERTY, AND HEALTH INSURANCE COVERAGE IN THE UNITED STATES: 2007, at 8 (2008), http://www.census. gov/prod/2008pubs/p60-235.pdf.
37. Median income, of course, varies from year to year as incomes rise or fall in the society as a whole. Half of median income rises and falls with the median, and hence, it constitutes a "relative" measure of poverty.
38. U.S. CENSUS BUREAU, PEOPLE IN FAMILIES BELOW 100% OF POVERTY (2008), http://www.census.gov/hhes/www/macro/032008/pov/new02_100_01.htm.
39. Other criticisms include the inflation measurement used (which arguably overstates poverty) and the exclusion of taxes (which understates by excluding payroll taxes and overstates by excluding the EITC)
40. See Douglas J. Besharov, Measuring Poverty in America: Testimony Before the Subcommittee on Income Security and Family Support (Aug. 1, 2007), available at http://www.welfareacademy.org/pubs/poverty/Pov_Meas_House_testimony_07_0801.pdf.
41. U.S. CENSUS BUREAU, THE EFFECT OF TAXES AND TRANSFERS ON INCOME AND POVERTY: 2006 (2007), http://pubdb3.census.gov/macro/032007/altpov/newpov01_001.htm.
42. See also ICELAND, supra note 14, at 35 (fig.3.2) (comparing poverty rates based on different poverty measures, including the official poverty line and a relative measure of half median income).
43. Their measure includes cash and near-cash benefits but excludes in-kind transfers such as health insurance and publicly provided child care
44. This omission probably tends to overstate the wellbeing of children in the United States relative to those in countries, such as the Scandinavian countries, which provide generous noncash benefits
45. Janet Gornick & Markus Jantti, Child Poverty in Upper-Income Countries: Lessons from the Luxembourg Income Study 6 (Lux. Income Study, Working Paper No. 509, 2009), available at http://www.lisproject.org/publications/liswps/509.pdf.
46. U.S. CENSUS BUREAU, HOW THE CENSUS MEASURES POVERTY (2009), http://www.census.gov/hhes/www/poverty/povdef.html.
47. LAWRENCE R. MISHEL ET AL., THE STATE OF WORKING AMERICA 128 (2002).
48. U.S. CENSUS BUREAU, MEAN EARNINGS OF WORKERS 18 YEARS AND OVER (2009), http://www.census.gov/population/socdemo/education/cps2008/tabA-3.xls.
49. SOC. SEC. ADMIN., ANNUAL STATISTICAL SUPPLEMENT: EMPLOYMENT AND EARNINGS, tbl.3.B3, http://www.ssa.gov/policy/docs/statcomps/supplement/2007/3b.pdf.
50. U.S. CENSUS BUREAU, POVERTY THRESHOLDS FOR 2008 (2009), http://www.census.gov/hhes/www/poverty/threshld/thresh08.html
51. The table uses poverty thresholds for a householder under age sixty-five, and for one child (two-person family) or two children (three-and four-person families)
52. Author's calculations based on U.S. Census Bureau data
53. Rev. Proc. 2008-66 § 3.06 (2008), available at http://www.irs.gov/pub/irs-drop/rp-08-66.pdf.
54. I.R.C. § 32 (2006).
55. U.S. GOV'T. ACCOUNTABILITY OFFICE, GAO-07-1147, UNEMPLOYMENT INSURANCE: LOWWAGE AND PART-TIME WORKERS CONTINUE TO EXPERIENCE LOW RATES OF RECEIPT 33 (2007) [hereinafter GAO-07-1147], http://www.gao.gov/new.items/d071147.pdf.33.
56. U.S. CENSUS BUREAU, EMPLOYMENT STATUS (2008), http://factfinder.census.gov/servlet/STTable?_bm=y&-geo_id=01000US&-qr_name=ACS_2008_1YR_G00_S2301&-ds_name=ACS_2008_1YR_G00_&-_lang=en&-redoLog=false&-format=&-CONTEXT=st.
57. U.S. CENSUS BUREAU, NUMBER OF FAMILIES BELOW THE POVERTY LEVEL AND POVERTY RATE tbl.13 (2009), http://www.census.gov/hhes/www/poverty/histpov/hstpov13.xls.
58. U.S. CENSUS BUREAU, LIVING ARRANGEMENTS OF CHILDREN UNDER 18 YEARS OLD tbl.Ch-1 (2009), http://www.census.gov/population/socdemo/hh-fam/ch1.xls.
59. U.S. CENSUS BUREAU, NUMBER OF FAMILIES BELOW THE POVERTY LEVEL AND POVERTY RATE tbl.13 (2009), http://www.census.gov/hhes/www/poverty/histpov/hstpov13.xls.
60. RAINWATER & SMEEDING, supra note 20, at 112 (taking into account transfers and measuring poverty at half the median income)
61. JODY HEYMANN, THE WIDENING GAP 114-15 (2000)
62. U.S. DEP'T OF LABOR, COVERAGE OF ESTABLISHMENTS AND EMPLOYEES UNDER THE FAMILY AND MEDICAL LEAVE ACT: 1995 AND 2000 SURVEYS tbl.A1-3.1 (2000), http://www.dol.gov/esa/whd/fmla/appendixa-1.pdf.
63. U.S. Bureau of Labor Statistics, Retirement Benefits: Access, Participation, and Take-Up Rates tbl.1, http://www.bls.gov/news.release/ebs2.t01.htm (last visited Sept.6 2009).
64. See infra, text accompanying note 78, for data on low levels of precautionary savings among low-income families
65. In other countries, collective bargaining institutions are more extensive, even when formal unionization is low
66. Richard B. Freeman & Casey Ichniowski, Introduction: The Public Sector Look of American Unionism, in WHEN PUBLIC SECTOR WORKERS UNIONIZE 7-17 (Richard B. Freeman & Casey Ichniowski eds., Nat'l Bureau of Econ. Research 1988).
67. See Edward N. Wolff, Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze 8 (Levy Econ. Inst., Working Paper No. 502, 2007) (showing that 17% of U.S. families had zero or negative net worth, 29.9% had net worth of less than $10,000, and 28% have zero or negative net worth if homes are excluded).
68. For a description of health care and poverty, see HANDLER & HASENFELD
69. U.S. CENSUS BUREAU, HEALTH INSURANCE COVERAGE STATUS (INCOME-TO-POVERTY RATIO IS BELOW 100%) tbl.HI03 (2008), http://www.census.gov/hhes/www/macro/032008/health/h03_001.htm.
70. U.S. CENSUS BUREAU, HEALTH INSURANCE COVERAGE STATUS tbl.HI02 (2008), http://www.census.gov/hhes/www/macro/032008/health/h02_001.htm
71. U.S. CENSUS BUREAU, HEALTH INSURANCE COVERAGE STATUS (INCOME-TO-POVERTY RATIO IS BELOW 100%) tbl.HI03 (2008), http://www.census.gov/hhes/www/macro/032008/health/h03_001.htm
72. U.S. CENSUS BUREAU, HEALTH INSURANCE COVERAGE STATUS (INCOME-TO-POVERTY RATIO IS BETWEEN 100 AND 125%) tbl.HI04 (2008), http://www.census.gov/hhes/www/macro/032008/health/h04_001.htm.
73. URBAN INST., LOW-INCOME WORKING FAMILIES: FACTS AND FIGURES 1 (2005), http://www.urban.org/UploadedPDF/900832.pdf
74. For statistics on housing affordability, see U.S. Dep't of Hous. & Urban Dev., Affordable Housing Needs 2005: Report to Congress (2007), http://www.huduser.org/Publications/pdf/AffHsgNeeds.pdf.
75. U.S. Dep't. of Agric., Food Security in the United States: Key Statistics and Graphs, http://www.ers.usda.gov/Briefing/FoodSecurity/stats_graphs.htm (last visited Sept. 6, 2009).
76. U.S. Dep't of Agric., Food Security in the United States: Measuring Household Food Security, http://www.ers.usda.gov/Briefing/FoodSecurity/measurement.htm (last visited Sept. 6, 2009).
77. The Food Stamp Program, now known as Supplemental Nutrition Assistance (SNAP) is a countercyclical program; with the current recession and an expansion of benefits, outlays are predicted to grow from about $40 billion in 2008 to about $50 billion in 2009
78. Budget of the United States Government, Historical Tables 235-36 (2009) (table 11.3), available at http://www.gpoaccess.gov/usbudget/fy10/pdf/hist.pdf.
79. For data on the distribution of Food Stamp benefits, see KENNETH FINEGOLD, FOOD STAMPS, FEDERALISM, AND WORKING FAMILIES 2 (Urban Inst. 2008), available at http://www.urban.org/UploadedPDF/411752_food_stamps.pdf
80. The SNAP program limits benefits to families living below 130% of the official poverty line who also meet other elements of a means test, as explained at http://www.fns.usda.gov/fsp/applicant_recipients/eligibility.htm#income.
81. JOSHUA WINICKI ET AL., HOW DO FOOD ASSISTANCE PROGRAMS IMPROVE THE WELLBEING OF LOW-INCOME FAMILIES? 3 (Econ. Res. Serv., U.S. Dep't of Agric., Food Assistance and Nutrition Research Report No. 26-9, 2002), available at http://www.ers.usda.gov/publications/fanrr26/fanrr26-9/fanrr26-9.pdf.
82. See LINDA GIANNARELLI & JAMES BARSIMANTOV, CHILD CARE EXPENSES OF AMERICA'S FAMILIES 3-7 (Urban Inst., Occasional Paper No. 40, 2000), available at http://www.urban.org/UploadedPDF/310028_occa40.pdf.
83. SHELLEY WATERS BOOTS ET AL., FAMILY SECURITY: SUPPORTING PARENTS' EMPLOYMENT AND CHILDREN'S DEVELOPMENT (Urban Inst., New Safety Net Paper 3, 2008), available at http://www.urban.org/UploadedPDF/411718_parent_employment.pdf.
84. PAMELA WINSTON, MEETING RESPONSIBILITIES AT WORK AND HOME: PUBLIC AND PRIVATE SUPPORTS 2 (Urban Inst. 2007), available at http://www.urban.org/UploadedPDF/411537_meeting_responsibilities.pdf.
85. U.S. BUREAU OF LABOR STATISTICS, NATIONAL COMPENSATION SURVEY: EMPLOYEE BENEFITS IN PRIVATE INDUSTRY IN THE UNITED STATES, MARCH 2006 tbl.23 (2006), http://www.bls.gov/ncs/ebs/sp/ebsm0004.pdf.
86. For a model of housing-market competition that rations access to schools, see generally Dennis Epple & Richard Romano, Neighborhood Schools, Choice, and the Distribution of Educational Benefits, in THE ECONOMICS OF SCHOOL CHOICE 227 (Caroline M. Hoxby ed., 2003).
87. See infra text accompanying notes 97-106.
88. MARGARET C. SIMMS, WEATHERING JOB LOSS: UNEMPLOYMENT INSURANCE 1 (Urban Inst., New Safety Net Paper 6, 2008), available at http://www.urban.org/UploadedPDF/411730_job_loss.pdf.
89. see also U.S. GOV'T. ACCOUNTABILITY OFFICE, GAO-01-181, UNEMPLOYMENT INSURANCE: ROLE AS SAFETY NET FOR LOW-WAGE WORKERS IS LIMITED (2000), http://www.gao.gov/new.items/d01181.pdf.
90. For a summary of coverage and benefits rules, see COMM. ON WAYS AND MEANS, U.S. HOUSE OF REPRESENTATIVES, 2008 GREEN BOOK, 4-4 to 4-14, available at http://waysandmeans.house.gov/media/pdf/111/uc.pdf.
91. See Gillian Lester, Unemployment Insurance and Wealth Redistribution, 49 UCLA L. REV. 335 (2001).
92. DAVID WITTENBURG, A HEALTH-CONSCIOUS SAFETY NET? HEALTH PROBLEMS AND PROGRAM USE AMONG LOW-INCOME ADULTS WITH DISABILITIES 2 (Urban Inst. Policy Brief, 2004), available at http://www.urban.org/UploadedPDF/311065_B-62.pdf.
93. DAVID WITTENBURG & MELISSA FAVREAULT, SAFETY NET OR TANGLED WEB? 4-5 (Urban Inst. Occasional Paper No. 68, 2003), available at http://www.urban.org/UploadedPDF/310884_ OP68.pdf.
94. SOC. SEC. ADMIN., Annual Statistical Report on the Social Security Disability Insurance Program, 2008: Beneficiaries, in CURRENT PAYMENT STATUS, tbl.3 (2009), http://www.socialsecurity. gov/policy/docs/statcomps/di_asr/2008/sect01.html.
95. For a description of the programs available to adults with disabilities, see WITTENBURG & FAVREAULT.
96. PAMELA LOPREST & KAREN MARTINSON, SUPPORTING WORK FOR LOW-INCOME PEOPLE WITH SIGNIFICANT CHALLENGES 2-4 (Urban Inst., New Safety Net Paper 5, 2008), available at http://www.urban.org/UploadedPDF/411726_supporting_work.pdf.
97. See, e.g., Gillian Lester, A Defense of Paid Family Leave, 28 HARV. J.L. & GENDER 1 (2005) (proposing paid family leave).
98. ACS & TURNER, supra note 10, at 9-12 (proposing tax credits to improve the affordability of housing and child care).
99. MICHAEL J. GRAETZ & JERRY L. MASHAW, TRUE SECURITY 202-09, 219-23, 240-44, 247-50 (1999) (proposing to expand the coverage of unemployment insurance, to expand disability benefits for temporary disability, and to expand public subsidies for child care and housing costs).