Do State Earned Income Tax Credits Increase Participation in the Federal EITC?
Author: David Neumark, Katherine E. Williams
Topic: Tax filing and benefits
Location: United States
Format: Working paper
Content Type: Research
Publication Date: November 30, 2016
In recent years, many states and some local governments implemented or expanded their own, supplemental Earned Income Tax Credit (EITCs). The expansion of state EITCs may have stemmed in large part from wanting to provide a more generous program than the federal program, because state EITCs increase transfer payments to the low-income recipients who qualify. However, state and local governments can also benefit from maximizing participation of their constituents in the federal EITC, and there are several reasons why state or local EITCs could increase participation in the federal EITC program. We find evidence that state EITCs increase federal EITC program participation. The effects are qualitatively consistent with what we would expect given theoretical predictions of the effects of an increase in state EITC generosity on labor supply.
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