View Research by Author - Laura Wheaton

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Citation URL: http://www.urban.org/LauraWheaton

This paper examines the noncustodial parent earned income tax credit (NCP EITC), a new type of credit recently enacted in New York and Washington, D.C. and proposed by Senator Bayh and then-Senator Obama in 2007. The NCP EITC offers an earned income tax credit to low-income noncustodial parents who work and pay their full child support. This paper describes the rationale for this policy and provides national estimates of the benefits and costs of an NCP EITC under three alternative policy scenarios. It also discusses several key design and implementation issues.

In 2004, 36.6 million people--or 12.6 percent of the U.S. population--were poor. The "poverty gap"--the amount of additional income required to remove all Americans from poverty--was $105.6 billion. Poverty rates were highest for African Americans, Hispanics, women, and persons under 25. Without government benefits, 61 million people would be poor. Social Security and other social insurance programs remove 21 million people from poverty. Means tested programs remove 3 million people from poverty. If food and housing assistance were counted as income for poverty purposes, an additional 7.6 million people would be counted as not poor.

This paper shows trends in underreporting of SSI, AFDC/TANF, Food Stamps, and Medicaid/SCHIP from 1993 to 2005 in the Current Population Survey (CPS) and discusses the extent of CPS allocation for nonresponse. Comparisons are made to the Survey of Income and Program Participation (SIPP) for 1997 and 2002. Baseline and poverty estimates from the 2004 simulation of the TRIM3 microsimulation model are presented to demonstrate the use of microsimulation in correcting for underreporting of means-tested benefits in the CPS.

The Deficit Reduction Act of 2005 includes incentives for states to increase the amount of child support that is "passed through" to families on welfare, rather than retained to offset welfare expenditures. Beginning October 1, 2008, the federal government will share in the costs of a $100 per month pass-through for families with one child and a $200 per month pass-through for families with two or more children. This brief discusses the potential benefits and costs to families, states, and the federal government if all states implemented a $100/$200 pass-through and disregard.

The child tax credit (CTC) is a $1,000 partially refundable federal income tax credit for each qualifying child under age 17. In 2007, tax filers may claim a refundable credit (over and above any tax liability) equal to 15 percent of the excess of earnings over $11,750, up to the $1,000 maximum per child. The earnings threshold means that families with very low incomes get no benefit from the credit, and others will receive only a partial credit. This brief analysis shows that many families with young children tend have lower incomes and are thus left out. In 2007, 30 percent of qualifying children under age 2 in working families had family incomes too low to benefit from the full credit, compared with 27 percent of children overall and 24 percent of children 10 and older.

This report presents an analysis of policies recommended by the Center for American Progress Task Force on Poverty. The analysis uses the TRIM3 microsimulation model. The policies include increasing the minimum wage, expanding the EITC and other tax credits, expanding the child care subsidy system, increasing participation in the Food Stamp Program, rescinding restrictions on legal aliens' eligibility for benefits, and increasing the number of housing vouchers. The analysis focuses on the policies' impacts on poverty, using a broad definition of income—after taxes and child care expenses and including the value of food and housing aid.

In 1997, Congress created a $500 per child tax credit (CTC). It has since been increased to $1,000 and made available to some lower-income families with children, even if they had no tax liability. Still, many low-income families (as well as some with high incomes) receive less than $1,000 per child in tax benefits. Moreover, because of differences in income, family composition, and employment status, nearly half of Blacks and 46 percent of Hispanics receive no or reduced benefits from the CTC because their incomes are too low. By comparison, only 18 percent of White children are in that category.

In 2003, the Child Support Directors Association of California contracted with the Urban Institute to develop a cost avoidance estimate for California using the same methodology used for the Office of Child Support Enforcement study. The results of that study are presented here (for state fiscal year 2000-01) and cover the following programs: the California Work Opportunity and Responsibility to Kids program, the Food Stamp Program, Medi-Cal, the Supplemental Security Income program, and federal housing assistance.

This paper examines the data on health insurance coverage and discusses trends in coverage. It considers the problems in the health insurance market and their implications on the nature and scope of government intervention. It uses the Urban Institute's Transfer Income Model (TRIM) to show who gains from the current tax exclusion, and examines the mismatch between current subsidy schemes and the problems in the health insurance market that an ideal subsidy might mitigate. Using TRIM, we simulate the effects of illustrative tax subsidy proposals on the distribution of tax benefits and discuss the effectiveness of those proposals at addressing health insurance market failures.

Policymakers are considering a variety of new tax credit proposals to expand health insurance coverage. Understanding how current tax subsidies work and their role in supporting employer-sponsored insurance (ESI) is important when designing such policies. This brief presents essential information about the structure and distribution of existing tax subsidies for ESI and the implications for new policy options.

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