|To view Table 1 and 2 please download the PDF.|
The ASEC data are asked every March and questions about income refer to the previous calendar year, so results can be interpreted as the average over the 2010–2014 time period. Roughly 200,000 individuals are included each year, resulting in a final sample of 1,007,595 observations analyzed in this brief. The 2014 CPS ASEC utilized a probability split panel design to test a new set of income questions. Approximately 3/8 of the sample were randomly assigned to be eligible to receive the redesigned income questions, and the remaining 5/8 of the sample were eligible to receive the set of ASEC income questions that had been in use since 1994. We combined these two subsets to create a single, harmonized 2014 data set. The redesigned income questions were then used for the entire 2015 CPS ASEC sample.5 All differences discussed in text are statistically significant (p<0.05)
Box 1: The Federal EITC
The federal Earned Income Tax Credit (EITC) supplements the wages of the nation’s low and moderate earners, with nearly one in ten Americans receiving this credit.2 The amount of EITC benefits vary by earnings and the number of dependent children in a family.3 Beginning with the first dollar earned, the credit increases as a percentage of total earnings until it plateaus at a threshold that is based on the number of dependent children. With additional earnings above the plateau level, the credit decreases until, eventually, it reaches zero. If the value of the credit is greater than the tax liability, the excess is paid out to the recipient. The EITC is considerably more generous towards families with children: in 2014 the maximum federal EITC subsidy for a family with three children was $6,242 compared to only $503 for a childless couple, and 97 percent of all EITC funds went to families with children.4 Ultimately, EITC benefits represent a very considerable proportion of resources for low-income families with children; for a married couple with three children and earnings of less than $14,000, the credit can be almost a third of family income.
This work was supported by the Annie E. Casey Foundation and anonymous donors. The authors thank Michael Ettlinger at the Carsey School of Public Policy for his feedback on earlier drafts of this brief, and Laurel Lloyd and Bianca Nicolosi for their layout assistance.