Despite its overall success and popularity, the federal earned income tax credit (EITC) policy does not work for low-income non-custodial fathers (NCFs) for several reasons. Because of low prevailing wages, many young, less-educated men do not work and are thus ineligible for the EITC. Further, they are penalized by regressive income tax policies, which do not take their child support obligations into account. Existing tax credits available to NCFs are often too meager to justify their high transaction costs, and they require full compliance with child support orders that NCFs often cannot afford to pay.

In the late 2000s, several legislative initiatives proposed to enhance the EITC for low-income NCFs, but the Great Recession undermined their relevance and the dialogue was suspended. With the return of job growth, a renewed interest in reforming the EITC may again be possible. Using both aggregate and individual-level data, this paper simulates the impact of changes in income and child support compliance criteria to estimate the number of NCFs who would be eligible for an alternative EITC.

Data for this study come from two national data sources. The first is the federal Transfer Income Microsimulation Model (TRIM3) developed by the Urban Institute under contract to the Department of Health and Human Services. The TRIM3 estimates are generated through a complex imputation process that starts with the number of households reporting NCF status in the U.S. Census Current Population Survey Annual Social and Economic Supplement (CPS-ASEC). Data are adjusted based on information from Child Support administrative records and other surveys (like the Survey of Income and Program Participation). Data from the TRIM3 will be used to simulate aggregate estimates of program participation by NCFs.

The primary contribution of the TRIM3 data is to inform estimates of the size of the NCF population. To better understand the needs and circumstances of low-income NCFs, the study also uses data from an individual-level data source, the Fragile Families and Child Well Being Study (FFCWBS), a national survey of the parents of nearly 5,000 children born in large U.S. cities between 1998 and 2000.The FFCWBS consists of separate interviews with the mothers and fathers of the children at birth and one, three, five, and nine years later. To account for sample attrition and item non-response, this paper employs multiple imputation to adjust missing information about NCFs based on available information from their partners and other similarly situated NCFs. Because the FFCWBS provides a much fuller account of low-income NCFs’ capabilities and circumstances than the TRIM3 and other sources, these data will be used to simulate the implications of various design considerations for the number of NCFs eligible for the proposed credit. These design considerations include—age restrictions, child support compliance conditions, and income conditions. Of particular interest is whether by relaxing prohibitively high child support compliance criteria and enhancing the value the credit, policymakers might overcome the current conundrum of low eligibility and low take-up.