Measuring the Disparate Effects of Using the Tax System to Distribute Pandemic Aid

Awarded Scholars:
Hilary Hoynes, University of California, Berkeley
Jesse Rothstein, University of California, Berkeley
Project Date:
Jan 2022
Award Amount:

Co-funded with the JPB Foundation

Federal and state policy makers increasingly rely on the tax system to distribute safety net programs, and never more so than during the COVID-19 economic crisis. In addition to the existing Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), Congress authorized three rounds of direct Economic Impact Payments (EIP) between April 2020 and March 2021. Prospective estimates indicated that the March 2021 round of stimulus payments would keep 11.4 million Americans out of poverty. Research on past payments suggests that these credits will likely have long term impacts on economic stability, health, and education. However, there has been a longstanding debate about the efficiency of distributing benefits through the tax system or via social welfare programs. For example, little is known about who might miss out on pandemic tax aid due to the reliance on tax filing as a delivery mechanism. Economists Hilary Hoynes and Jesse Rothstein will use California administrative data to measure take-up of the safety net program benefits distributed through the tax system during the pandemic in 2020 and 2021. They will use a first-of-its-kind, person-level administrative dataset that uses Supplemental Nutrition Assistance Program (SNAP) and the Temporary Assistance for Needy Families (TANF) caseloads combined with quarterly wage data to identify low-income families who are eligible for the tax credits. Then, they will link these to actual tax returns to identify credit recipients, allowing them to assess take-up rates among low-income households, and differences by race, ethnicity, and residential location, and measure the effects of tax credits on poverty. The investigators will address four questions. First, how many eligible Californians enrolled in SNAP and TANF did not receive existing, expanded, and new state and federal tax aid during the pandemic? Are there differences in take-up among eligible Californians by race and ethnicity, wage earnings, immigration status, or geography? Third, to what extent might delivery through the tax system affect these disparities? Finally, to what extent did the safety net programs, and tax credits affect family poverty in 2020, overall and for subgroups? 


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