Do State Earned Income Tax Credits Increase Participation in the Federal EITC?
In recent years, many states and some local governments implemented or expanded their own supplemental Earned Income Tax Credits (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 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 some evidence suggesting that state EITCs may increase federal EITC program participation among low-skilled single filers with children.
We are grateful to Marianne Bitler, Damon Clark, and three anonymous for very helpful comments. Katherine Williams’ work on this project was largely completed when she was a Ph.D. student at UCI. The views expressed herein are those of the authors, and do not necessarily reflect the views of the National Bureau of Economic Research.