NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Elira Kuka

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Working Papers

January 2014Do In-Work Tax Credits Serve as a Safety Net?
with Marianne Bitler, Hilary Hoynes: w19785
The cash and near cash safety net in the U.S. has undergone a dramatic transformation in the past fifteen years. Federal welfare reform has led to the "elimination of welfare as we know it" and several tax reforms have substantially increased the role of "in-work"' assistance. In 2010, we spent more than 5 dollars on the Earned Income Tax Credit (EITC) for every dollar spent on cash benefits through Temporary Assistance for Needy Families (TANF), whereas in 1994 on the eve of federal welfare reform these programs were about equal in size. In this paper, we evaluate and test whether the EITC satisfies a defining feature of a safety net program--that it responds to economic need. In particular, we explore how EITC participation and expenditures change with the business cycle. The fact that t...

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