Paycheck Plus: Expanded Earned Income Tax Credit for Single Adults

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Overview

The federal Earned Income Tax Credit (EITC), which supplements the earnings of families by as much as $6,000 a year, is the largest and most successful antipoverty program in the United States. It has significantly increased income among poor families, lifting 6.6 million people out of poverty nationally in 2011 alone and contributing to substantial increases in employment among single mothers. But the federal EITC for single tax filers, which is capped at a maximum annual payment of just over $500, is much less generous and as a result less effective at increasing employment and reducing poverty.

One of the most documented changes in the labor market over the past several decades has been the reduction in real wages for less-skilled workers, a decline that has been concentrated largely among men, who generally don’t qualify for the more generous EITC for families with dependent children. A typical male worker with a high school diploma, for example, earned 15 percent less in 2011 than he did in the early 1970s. This decline in the payoff to work has contributed to reduced employment rates, increased criminal activity, and reduced marriage rates. Research suggests that for single adults an enhanced EITC could increase employment and incomes by as much as 10 percent.

Paycheck Plus, a pilot program to simulate an expanded EITC for low-income single workers without dependent children, is being implemented and evaluated in two U.S. cities: New York, New York and Atlanta, Georgia. The pilot test in New York City began in late 2013 and in Atlanta in October 2015.

Paycheck Plus enrollment has been completed in both New York and Atlanta.

If you are an Atlanta participant and you want to learn how to request your first bonus in 2017, please call 888-366-9647.

If you are a New York City participant and you want to check on your bonus, please wait 2-3 months after you submit your bonus request, and then visit http://paycheckplus.mdrc.org/.

Additional Project Details

Agenda, Scope, and Goals

The evaluation will test the potential impact of an enhanced Earned Income Tax Credit (EITC) on income, employment, and earnings for participating single adults. Paycheck Plus will simulate an enhanced EITC but will not offer an actual tax credit nor operate through the city, state, or federal tax systems. The pilot program will mimic the income tax filing process by having participants present their completed annual tax forms to claim the enhanced credit. In addition to determining the effect of the supplement on labor-market participation, earnings, and income, the demonstration will also test whether it can improve compliance with child-support requirements among noncustodial parents and reduce the rate at which people with criminal records are reincarcerated.

The demonstration will offer up to $2,000 a year over a three-year period to participants with earnings of up to nearly $30,000 per year, with the maximum payment being made to those with earnings between $6,667 and $18,000. The pilot test in New York City includes about 6,000 participants, with 3,000 eligible to receive the expanded credit and 3,000 forming a control group. Sample enrollment began in fall 2013. The pilot test in Atlanta includes about 4,000 participants, and enrollment began in October 2015.

Design, Sites, and Data Sources

The evaluation of Paycheck Plus uses a random assignment research design, with a program group who is eligible to receive the expanded credit and a control group who is not. Individuals in the program group in each city will be eligible for the credit payments for three years. In New York, individuals can receive the credit for earnings in tax years 2014, 2015, and 2016. In Atlanta, individuals can receive the credit for earnings in tax years 2016, 2017, and 2018. Both research groups in each city will be tracked for up to four years to determine the effects of the expanded credit on income, earnings, poverty, child-support payments, criminal-justice-system involvement, and family formation.

Enrollment in New York City was conducted at Volunteer Income Tax Assistance (VITA) sites across the city staffed by the project’s operations partner, Food Bank For New York City (FBNYC). A range of other agencies also served as recruitment and referral partners, with FBNYC staff members either conducting enrollment there or referring eligible participants to one of the VITA sites. Enrollment in Atlanta was conducted by that city’s operations partner, United Way of Greater Atlanta, with assistance from several other agencies and referral partners.

Data sources will include a baseline survey, a participant survey at 32 months after random assignment, tax data from participating VITA sites, tax records, W-2 forms and 1099 forms submitted to the IRS, and administrative records covering unemployment insurance earnings and child-support payments and orders.

Reports for the New York test include policy briefs in 2014, 2015, and 2016 an interim impact report in 2017, and a final impact report in 2018. Reports for the Atlanta test include an interim impact report in 2019 and a final impact report in 2020.