Panel: Income Measurement and Tax Policy
(Poverty and Income Policy)

Friday, November 9, 2018: 1:30 PM-3:00 PM
8223 - Lobby Level (Marriott Wardman Park)

*Names in bold indicate Presenter

Panel Chairs:  Katherine Michelmore, Syracuse University
Discussants:  Bryan Stuart, George Washington University and Leticia Fernandez, U.S. Census Bureau

Linking Survey and Administrative Data to Measure Income, Inequality, and Mobility
Carla Medalia1, Bruce Meyer2, Amy O'Hara3 and Derek Wu2, (1)U.S. Census Bureau, (2)University of Chicago, (3)Stanford University

Does the EITC Pay for Itself?
Jacob Bastian, University of Chicago and Maggie R. Jones, U.S. Census Bureau

Household Incomes in Tax Data: Using Addresses to Move from Tax Unit to Household Income Distributions
Jacob Mortenson1, Jeff Larrimore2 and David Splinter1, (1)Joint Committee on Taxation, (2)Federal Reserve Board

The papers in this panel provide new information on how inequality, poverty, and anti-poverty programs are measured and evaluated.

Medalia, Meyer, O’Hara, and Wu are developing the Comprehensive Income Dataset, a restricted micro-level dataset with income and demographic characteristics that provides an accurate and comprehensive measure of income for the population of U.S. families and households. This resource includes information on public program participation and tax credit receipt and is by far the best source to analyze poverty, inequality, mobility, and the distributional consequences of government transfers and taxes.

Bastian and Jones find evidence that the Earned Income Tax Credit pays for itself through contemporaneous increases in tax revenue and decreases in public assistance usage. Using both public-use data and administrative tax data linked with the Current Population Survey, the authors show that the net fiscal impact of the EITC on government is essentially zero. Since the EITC increases maternal employment and family resources, this leads to more payroll, unemployment, and sales taxes paid, and less welfare, food stamps, public housing, and disability assistance.

Larrimore, Mortenson, and Splinter present the first measures of household-based income inequality using tax records. By linking tax records with the same addresses, the authors are able to identify and combine individuals in separate tax units living in the same household. The authors find that household-based inequality is 10 percent lower than estimates based on tax units. Household-based income measures also suggest that the federal income tax code is less progressive than conventionally understood.

Jones looks at how tax refund anticipation products (e.g. tax refund loans or temporary bank accounts) affect EITC noncompliance. When lower-income and often unbanked tax filers apply for the EITC using tax preparers and tax refund anticipation products, both tax filers and tax preparers have an incentive to erroneously overclaim EITC benefits. Jones finds that the rate of EITC noncompliance and the dollar value of overpayment is positively related to tax refund products.

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