The transient’s key findings are:
- The Earned Revenue Tax Credit score (EITC) encourages low-income individuals with youngsters to work – these with out youngsters get a a lot smaller credit score.
- Earlier EITC analysis has centered on youthful households, however some analysts recommend an expanded childless credit score may enhance work amongst close to retirees.
- This examine finds that elevating the EITC by $1,000 would produce a modest rise in employment amongst single ladies ages 55-64.
- Nevertheless, this influence is far smaller than that for youthful single ladies, maybe as a result of older ladies have greater earnings or extra well being limitations.
- Thus, an expanded EITC would primarily profit youthful staff, although with a optimistic facet impact for a minimum of some older staff too.
Introduction
The Earned Revenue Tax Credit score (EITC) – a refundable credit score that rises with earnings up to some extent earlier than phasing out – is likely one of the federal authorities’s largest poverty discount applications. The EITC’s design – which yields no profit to non-workers – has been discovered to encourage employment amongst lower-income people. This uncommon mixture of poverty discount and work encouragement implies that growth of the EITC has lengthy loved bipartisan help. One of the crucial widespread solutions for growth is a rise within the dimension of the credit score for childless households, which is at the moment so small that few individuals use it.1 Certainly, a tripling of the childless profit was a part of a brief package deal enacted in the course of the COVID pandemic.2
An growth of the childless profit is normally framed as a boon for the well-being of youthful, low-income staff. Nevertheless, some have identified that one other profit could also be to encourage low-income people approaching retirement – who are sometimes liable to insufficient retirement sources – to increase their careers.3 Because the overwhelming majority of staff close to retirement – outlined right here as ages 55-64 – shouldn’t have dependent kids, they might profit from such an growth. Nevertheless, as a result of the present EITC is used primarily by these with kids, no analysis has centered on how older people may reply to any growth. However, roughly 15 p.c of people close to retirement do have dependent kids, and this transient makes use of them as a base for an evaluation of how older people responded to previous expansions relative to their youthful counterparts.4
The dialogue proceeds as follows. The primary part supplies background on the EITC. The second part discusses the methodology used to discover the influence of EITC expansions on older staff, and the third part discusses the outcomes. The ultimate part concludes that whereas previous EITC expansions possible have inspired some older staff to increase their careers, the impact is important only for single ladies and solely at a 3rd the speed of their youthful counterparts. Therefore, expansions of the childless credit score must be thought of primarily within the context of youthful staff, however with the popularity that such an growth will possible encourage a minimum of some older people to work longer.
Background on the EITC
The EITC began as a small, short-term provision in 1975, however growth through the years has made it one of many greatest federal antipoverty insurance policies.5 The credit score is refundable, in order that it will probably improve the revenue out there to a family as a substitute of merely lowering its tax burden. The fundamental construction of the EITC is illustrated in Determine 1, utilizing the 2019 guidelines for instance (the evaluation stops that yr to keep away from short-term adjustments in EITC guidelines throughout COVID). The determine exhibits 4 distinguished options of this system. First, as talked about above, the EITC may be very small for households with out dependent kids.6 Second, the EITC will increase with the variety of dependent kids. Third, the credit score will increase as a family goes from no earned revenue as much as a average revenue earlier than plateauing. And fourth, the credit score is step by step phased out as earned revenue will increase. Mixed, these 4 options imply that the EITC at the moment impacts primarily low-income households with kids, typically single moms.

As a result of the EITC solely applies to staff, it goals to encourage individuals to go from not working to working. Analysis on the subject strongly means that the coverage achieves this purpose, particularly for youthful single mother and father.7 However, little analysis to this point has centered on the EITC’s impact on older staff, though non-EITC-based analysis has recommended that they might reply in another way than youthful people to tax incentives.8 The rationale for this lack of focus is straightforward. Simply 15 p.c of people ages 55-64 nonetheless have dependent kids. Nonetheless, though small in proportion, this group who do have dependent kids can function a base for analysis.
Methodology
This transient makes use of the Present Inhabitants Survey (CPS) from 1988-2019 and follows the methodology of Bastian and Jones (2021). That paper exploits variation within the dimension of the EITC each over time and throughout households with completely different numbers of dependent kids. Determine 2 exhibits this variation and illustrates two developments. First, in actual phrases, the utmost dimension of the EITC credit score has elevated for the reason that Eighties, with discrete jumps in 1991, 1994, and 2009. Second, the utmost credit score has diversified extra by the variety of kids in a family as households with extra dependent kids got bigger advantages relative to these with fewer.
The evaluation compares the employment of people with completely different entry to the EITC, utilizing the utmost credit score that every group can obtain as a proxy for program generosity. Though Determine 2 exhibits that giant jumps in EITC advantages happen just some occasions, these adjustments introduce substantial variation within the most profit throughout households. For instance, in 1987, households with dependent kids acquired a modest most credit score of $1,915 (in 2019 {dollars}), no matter their household dimension. By 1996, that quantity for households with a single youngster had practically doubled to $3,513, and households with two or extra kids had seen their most profit triple to $5,796. Additional separation occurred for households with three or extra kids in 2009, after they acquired an almost 20-percent enhance of their most profit. Throughout the pattern thought of right here, the typical most EITC is $2,697, with a normal deviation of $2,334.

A regression is used to match the employment charge of people going through completely different most EITC advantages, controlling for variety of kids, schooling, race, age, state of residence, and yr noticed. Regressions are run solely on these with a highschool diploma or much less, as they’re almost definitely to be impacted by any growth of the EITC primarily based on their decrease earnings ranges.
Prob(Employment) = f(maxEITC, kids, race, schooling, age, yr, state of residence)
This method takes benefit of the truth that households with the identical variety of kids face completely different advantages at completely different occasions, whereas households on the identical cut-off date face completely different advantages primarily based on their variety of kids. So, for instance, to the extent that people in households with three versus one dependent youngster work much less in 1987, the regression asks: did that distinction change when a three-child family acquired a relatively bigger EITC profit in 2010? Utilizing this method, Bastian and Jones report that the EITC considerably will increase the employment charge of girls, with the impact concentrated amongst single ladies.9
The query right here is, does this outcome differ primarily based on the age of the person? Thus, the evaluation is carried out individually for staff ages 25-54 and 55-64. As a result of the consequences of this system possible differ for girls relative to males (who are likely to earn extra), the evaluation can be accomplished individually by gender. And, as a result of the EITC can influence single versus married households in another way, the evaluation is additional separated by marital standing.10
Outcomes
Earlier than turning to the regression outcomes, Desk 1 highlights key traits of the pattern by age. The older people are much less prone to be employed, to have dependent kids, and to be Hispanic, and barely extra prone to be highschool dropouts.

Determine 3 highlights the primary outcomes of the regression evaluation, with full ends in the Appendix. The determine exhibits how the varied teams’ probability of employment is predicted to reply to a $1,000 improve within the highest EITC profit out there to them. For girls, the outcomes recommend that older singles could be anticipated to extend their likelihood of working by 1.5 share factors, which is statistically important. Nevertheless, the scale of the impact is considerably smaller than for youthful single ladies, whose employment could be anticipated to extend by 5.5 share factors. This outcome could stem from the truth that older ladies have extra work expertise and better earnings and so are much less affected by expansions. Or, the decrease impact may replicate extra well being limitations amongst this older group.11

The impact for older single males is comparable in magnitude to single ladies, however insignificant statistically. This insignificance is probably going as a result of the pattern of single males ages 55-64 is simply 60 p.c the scale of single ladies of this age, each because of the greater mortality of males and the (associated) proven fact that males on this age bracket usually tend to be married. Youthful single males are considerably affected however at a decrease charge than youthful single ladies, once more possible attributable to their greater earnings.
Married ladies in each age brackets aren’t predicted to be considerably affected. Such a discovering is widespread for younger ladies a minimum of, as married {couples} typically earn an excessive amount of to qualify for even the expanded variations of the EITC. Plus, if a girl has decrease potential earnings than her husband, he will be the one to decide on to work for wages and declare the EITC. Certainly, a optimistic important impact is discovered for youthful married males. Older married males appear to not be affected, possible as a result of their greater earnings typically push them out of EITC eligibility no matter whether or not the scale of the credit score expands.
Conclusion
Enlargement of the EITC – and particularly the childless employee profit – is one coverage that might encourage older people to work longer. The outcomes right here recommend that increasing the EITC would possible have a statistically important influence on some older people’ employment. However, that influence is almost definitely to happen for older single ladies – who signify simply 20 p.c of these ages 55-64 – and at a charge simply one-third that of comparable, youthful people. Whereas this evaluation relies totally on expansions to these with kids, it supplies a number of the first proof that older staff could also be much less conscious of the EITC than their youthful counterparts.
That stated, it’s clear from this evaluation and others prefer it that EITC growth has a substantial impact on the labor provide of youthful staff and with a optimistic facet impact: a minimum of some older staff are prone to enter the labor power. These optimistic results on employment, which scale back poverty and dependence on different authorities applications, could also be purpose sufficient to help an growth of the coverage.
References
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Bastian, Jacob E. 2020. “The Rise of Working Moms and the 1975 Earned Revenue Tax Credit score.” American Financial Journal: Financial Coverage 12(3): 44-75.
Bastian, Jacob E. and Maggie R. Jones. 2021. “Do EITC Expansions Pay for Themselves? Results on Tax Revenues and Authorities Transfers.” Journal of Public Economics 196: 104355.
Breunig, Robert V. and Andrew Carter. 2018. “Do Earned Revenue Tax Credit for Older Employees Extend Labor Market Participation and Increase Earned Revenue? Proof from Australia’s Mature Age Employee Tax Offset.” Working Paper 2018-15. Canberra, AU: Tax and Switch Coverage Institute.
Congressional Analysis Service. 2018. “The Earned Revenue Tax Credit score (EITC): A Transient Legislative Historical past.” CRS Report R44825. Washington, DC.
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Munnell, Alicia H. 2018. “Need Individuals to Maintain Working Longer? Broaden the Earned Revenue Tax Credit score.” (November 14). New York, NY: MarketWatch.
Tax Coverage Middle. 2024. “EITC Parameters.” Statistics. Washington, DC: City Institute and Brookings Establishment.
Yin, Yimeng, Anqi Chen, and Alicia H. Munnell. 2024. “The Nationwide Retirement Danger Index: An Replace from the 2022 SCF.” Concern in Transient 24-5. Chestnut Hill, MA: Middle for Retirement Analysis at Boston School.
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