The Earned Income Tax Credit Versus The Temporary Assistance for Needy Families
by The introduction starts with the question and why it is important. Then there is a brief discussion about the methodology.
Financial data collected for the Temporary Assistance for Needy Families (TANF) and the Earned Income Tax Credit (EITC) for the year 2002 along with US quarterly data from 1947 through 2002 is crucial for making a comparison. Furthermore, the Unemployment Rate of single mothers from 1990 to 2003 was compared with the TANF family recipiency rate from 1990 to 2003.
The main point is that the EITC and the TANF affect the budget constraint differently. Cash transfer program like the TANF can entice some workers to quit their jobs and entices no one to actually start working.
The conclusion looks at the implications of the model and concludes that after weighing the costs and benefits, the EITC is preferred to the TANF in this regard.
So now we take a look at the question for this research.
Question
Would the removal of the Temporary Assistance for Needy Families (TANF) in favor of the Earned Income Tax Credit (EITC) increase employment for low-income individuals?
Why is This Important?
This is important because the question of whether welfare lessens work effort and propagates dependence on the government has been ardently debated by policy makers for years. Also, spending on transfer programs have gone up sharply, with an increase from 4.8 percent of Gross Domestic Product (GDP) in 1965 to 10.1 percent in 2003.[1]
[1] U.S. Department of Health and Human Services, Social Security Bulletin, Annual Statistical Supplement, 2003 (Washington, D.C.: Government Printing Office, July 2004); http://www.ssa.gov/policy/docs/statcomps/supplement/2003/#editions.
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