There is no conflict of interest.
Citation
Miller, C., Katz, L. F., Yang, E., Bernardi, A., Islen, A., & Aloisi, K. (2020). A More Generous Earned Income Tax Credit for Singles: Interim Findings from the Paycheck Plus Demonstration in Atlanta (Report No. 2020-28). Washington, DC: Office of Planning, Research, and Evaluation, Administration for Children and Families, U.S. Department of Health and Human Services.
Highlights
- The study's objective was to examine the impact of the Paycheck Plus Demonstration (Paycheck Plus) on employment and earnings outcomes.
- The study used a randomized controlled trial to assign participants to the Paycheck Plus (treatment) group or control group. Using data from state and federal agencies, the authors conducted statistical models to compare the outcomes of treatment and control group members.
- The study found that treatment group members had significantly higher after-bonus earnings in Year 1 compared to control group members.
- This study receives a high evidence rating. This means we are confident that the estimated effects are attributable to Paycheck Plus, and not to other factors.
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Intervention Examined
Paycheck Plus
Features of the Intervention
The Earned Income Tax Credit (EITC) is a tax benefit designed to assist low-income workers and families. It aims to reduce the tax burden for these earners and can result in a refund even if no taxes are owed. At the time of the study, the EITC provided a maximum credit of $519 for individuals without dependent children, specifically for those earning less than $15,000 a year. The Paycheck Plus project enhanced the EITC for individuals without dependents, offering a tax credit of up to $2,000 for those making up to $30,000 annually. Paycheck Plus referred to this tax credit as a "bonus."
Features of the Study
The study was a randomized controlled trial that assigned eligible participants to the treatment or control groups. Participants were recruited from 13 metropolitan counties in the Atlanta area between October 2015 and April 2016. To be eligible for Paycheck Plus, participants had to be unmarried, between the ages of 21 and 64, without dependent children, have earned less than $30,000 in the previous year, not be receiving or applying for Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI), and possess a valid Social Security number. The treatment group could receive a bonus when they filed their tax return in 2017, 2018, and 2019, depending on their earnings from the previous years. Control group members were not eligible for Paycheck Plus but could still receive other tax credits. Of the 3,972 study participants, the majority were non-Hispanic Black (86%) and earned less than $18,000 in the prior tax year (80%). Over half of the sample were male (61%), age 36 or older (60%), and had a high school diploma or equivalent degree (60%). Less than half were currently employed (46%) and had been previously incarcerated (28%).
The study used baseline survey data and employment and earnings data from the Georgia Department of Labor (Unemployment Insurance records) and the Internal Revenue Service (tax records). The authors used statistical models to compare the employment and earnings outcomes of treatment and control group members for tax years 2016 and 2017, which correspond to years 1 and 2 of the program.
Findings
Employment
- The study found no significant differences in employment rates between the treatment and control group members in Year 1 or Year 2.
- The study also found no significant differences in employment rates in either year by sex or previous incarceration status.
Earnings and wages
- The study found no significant differences in wage earnings or total earnings (wages and self-employment) between the treatment and control groups in either year. However, treatment group members had after-bonus earnings (earnings after taxes and the Paycheck Plus bonus) that were $773 higher than those in the control group in Year 1, a difference that was statistically significant. No significant difference was found in Year 2.
- When examining the earnings of women, both average and after-bonus earnings were not significantly different between the treatment and control groups in either year. Similarly, men’s average earnings were not significantly different between the groups across both years. For men in the treatment group, after-bonus earnings were $1,002 higher than those in the control group in Year 1, which was also statistically significant, but this difference was not significant in Year 2.
- Similarly, previously incarcerated participants' earnings (both average and after-bonus earnings) did not differ significantly between the two groups across both years. For participants who had not been previously incarcerated, after-bonus earnings in the treatment group were significantly higher ($721) than those in the control group in Year 1, but not significant in Year 2. Average earnings for this group did not differ significantly between treatment and control members in either year.
Considerations for Interpreting the Findings
The study authors describe several implementation barriers. There were 12 Volunteer Income Tax Assistance (VITA) sites where tax preparation services were offered and were recommended to participants. However, it was difficult to connect program members with United Way and its VITA partners because United Way was a new VITA provider and did not have a strong community presence for its free tax services. Another barrier was the distance to VITA sites, as participants were recruited from 13 counties in the Atlanta area. Lastly, there was a 9- to 15-month delay between the initial enrollment of participants in the program (from October 2015 to April 2016) and their eligibility for the tax credit during the 2017 tax season.
Causal Evidence Rating
The quality of causal evidence presented in this report is high, because it was based on a well-implemented randomized controlled trial. This means we are confident that the estimated effects are attributable to Paycheck Plus, and not to other factors.