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Title: Comparing Welfare and Tax Policy: Earned Income Tax Credit and Unconditional Basic Income in the United States

Citation Type: Dissertation/Thesis

Publication Year: 2014

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Abstract: This paper examines the impact of the Tax Reform Act of 1986 (TRA86) and the Omnibus Budget Reconciliation Act of 1993 (OBRA93), which included expansions of the earned income tax credit (EITC), on the labor force participation and educational enrollment of single women with children. Comparing the respective changes in labor supply and educational enrollment of single women with children to the changes for single women without children identifies the impact of TRA86 and OBRA93. The empirical results on labor force participation are not without ambiguity, yet generally confirm earlier reports that the EITC increases labor force participation. Contradicting a previous study, I find that the EITC increases educational enrollment, too. This paper also analyzes the economic consequences of alternative welfare and tax models. By means of a computable general equilibrium (CGE) model the effects of reducing and abolishing labor taxes and introducing an unconditional basic income (UBI) are studied. The results indicate that following the introduction of a basic income, production output would fall and prices rise, yet welfare disparities would be reduced. The reduction in labor taxation has a positive effect on employment that is offset by the introduction of the basic income.

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Authors: Figge, Bela

Institution: Bennington College

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Publisher Location: Bennington, VT

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Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure, Other, Poverty and Welfare

Countries: United States