“Secondary Evasion” and the Earned Income Tax Credit

This paper documents that the earned income of taxpayers claiming the earned income tax credit (EITC) tends to cluster within $800 intervals surrounding the kink points of the EITC benefit distribution. This clustering is especially strong for head of household taxpayers around the kink point of the...

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Bibliographic Details
Published in:The Journal of the American Taxation Association 2005-10, Vol.27 (2), p.27-55
Main Authors: Schmidt, Andrew P., Werner, Edward M.
Format: Article
Language:English
Subjects:
Children & youth
Compliance
Earned income
Earned income tax credit
Earnings
Households
Income taxes
Prepayments
Regression analysis
Self employment
Social security taxes
Studies
Tax credits
Tax evasion
Tax rates
Taxpayers
Wages & salaries
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Description
Summary:This paper documents that the earned income of taxpayers claiming the earned income tax credit (EITC) tends to cluster within $800 intervals surrounding the kink points of the EITC benefit distribution. This clustering is especially strong for head of household taxpayers around the kink point of the phase-in range and, to a lesser extent, for married filing joint taxpayers around the kink point of the phase-out range. The results from logit regression models estimated by filing status and kink point location indicate that “secondary evasion” with respect to the EITC is more associated with the characteristics of head of household taxpayers than those of married filing joint taxpayers.
ISSN:0198-9073
1558-8017
DOI:10.2308/jata.2005.27.2.27