TY  - JOUR
AU  - Eissa,Nada
AU  - Hoynes,Hilary
TI  - Behavioral Responses to Taxes: Lessons from the EITC and Labor Supply
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11729
PY  - 2005
Y2  - November 2005
UR  - http://www.nber.org/papers/w11729
L1  - http://www.nber.org/papers/w11729.pdf
N1  - Author contact info:
Nada Eissa
313 Old North
Georgetown University
Washington DC, 20057
Tel: 202/687-0626
Fax: 202/687-5544
E-Mail: noe@georgetown.edu

Hilary W. Hoynes
Department of Economics
University of California, Davis
One Shields Ave.
Davis, CA  95616-8578
Tel: 530/564-0505
Fax: 530/752-9382
E-Mail: hwhoynes@ucdavis.edu
M1  - published as Nada Eissa, Hilary W. Hoynes. "Behavioral Responses to Taxes: Lessons from the EITC and Labor Supply," in James M. Poterba, editor, "Tax Policy and the Economy, Volume 20" The MIT Press (2006)

AB  - Twenty-two million families currently receive a total of $34 billion dollars in benefits from the Earned Income Tax Credit (EITC). In fact, the EITC is the largest cash transfer program for lower-income families at the federal level. An unusual feature of the credit is its explicit goal to use the tax system to encourage and support those who choose to work. A large body of work has evaluated the labor supply effects the EITC and has generated several important findings regarding the behavioral response to taxes. Perhaps the main lesson learned from the evidence is the confirmation that real responses to taxes are important; labor supply does respond to the EITC. The second major lesson is related to the nature of the labor supply response. A consistent finding is that labor supply responses are concentrated along the extensive (entry) margin, rather than the intensive (hours worked) margin. This distinction has important implications for the design of tax-transfer programs and for the welfare evaluation of tax reforms.
ER  -