MDRC in the News

Childless Workers Often Lose Out on Tax Credits. Not with this Program

The Christian Science Monitor

03/2019

After Keith Hardrick quit his job last year as a school social worker, his income took a dive. As he figures out his next career move, he’s tapped into the gig economy, recharging electric scooters for a startup company in Atlanta. All told, he earned around $12,000 in 2018.

But this year’s tax season smiled on Mr. Hardrick. Not because of President Donald Trump’s tax cuts, which mostly accrue to corporations and high earners, but because he had enrolled in a three-year experimental program that tests what happens when single workers on low incomes receive more generous annual tax refunds.

In the first two years, Mr. Hardrick didn’t see any benefits because his income was too high. This time, though, he qualified for a payout of $1,500. He plans to use the money to change residences this month, and to set up his new place while paying some bills…..

…..The program in Atlanta mimics the Earned Income Tax Credit, a federal initiative that is credited with moving millions of families out of poverty by providing a supplement to low wages.

Unlike that program, however, it is targeted not at parents but at adults without dependent children, who get the short end of the EITC stick. By doing so it fits squarely into the national debate over how to reduce inequality while promoting work and responsibility in an era of often-stagnant wages. It’s a debate that animates the crowded left field of Democratic presidential aspirants and other officeholders, as well as conservatives who see EITC as a pro-work policy that is preferable to welfare.

“Not every policymaker loves it but it does have broad support,” says Caroline Schultz, a senior associate at MDRC, a New York-based nonprofit that ran the EITC-style program in Atlanta and New York in partnership with public and private organizations…..

…..In New York, MDRC found that enrollees in Paycheck Plus had higher after-tax earnings and saw a reduction in severe poverty compared to the control group. Noncustodial parents, typically men, were more likely to make child support payments when they got bonuses…..

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