OPRE, in partnership with MDRC, recently published a new report about Paycheck Plus, a test of an Earned Income Tax Credit (EITC) expansion for low-income workers without dependent children in Atlanta, Georgia. EITC, one of the federal government’s largest antipoverty programs, has lifted millions of people out of severe poverty. It provides a refundable credit at tax time to eligible workers with low incomes. An extensive research base demonstrates its effectiveness (for example, see this OPRE brief that summarizes the evidence on the EITC), and it has gained bipartisan support from policymakers for both its antipoverty and pro-work effects. However, the credit provides only a very small refund for single workers with no qualifying children.
Paycheck Plus offered childless workers a credit, referred to in the program as a bonus, of up to $2,000 at tax time and extended benefits to eligible workers earning up to $30,000 per year, twice the maximum income limit of the federal EITC. Paycheck Plus was tested in Atlanta to add to the evidence of how an expanded EITC might work in a context different from New York City, where the program ran from 2014 through 2017. In New York , the more generous bonus increased workers’ after-bonus earnings, modestly increased employment rates, increased tax filing rates, and increased child support payment among noncustodial parents. The Atlanta study assessed take-up rates (the percent of eligible adults who applied for and received the bonus) and the program’s effects on employment, earnings, and income over three years for the approximately 4,000 single adults with low incomes who were recruited to take part in the study. The goal is to use the findings from both cities to inform consideration—whether federal or state and local—of tax credit amounts for workers without dependent children. This new report presents final impacts from the test in Atlanta.
The report shares several major findings:
- About 45 percent of the program group members who were eligible for a bonus received one in the third year of the program. Among those who received bonuses in Year 3, the average amount was $1,296. Lower tax filing rates among individuals with very low earnings who are not required to file taxes may account for the high proportion of individuals who were eligible for the Paycheck Plus bonus but did not receive it.
- The final year of the program was affected by many operational challenges, including reaching eligible participants to encourage them to apply for the bonus. Paycheck Plus Atlanta’s operating capacity also shrank substantially in its final year, driven by cutbacks in United Way’s Volunteer Income Tax Assistance (VITA) program, an important operational program partner. (VITA programs offer free tax help to individuals who earned under $57,000 in the past year.)
- Paycheck Plus increased after-bonus earnings in the first year of the program but not in Years 2 and 3. It neither increased nor reduced employment during the program’s three years. Average after-bonus earnings was $10,601 for the program group during Year 1, compared with $9,826 for the control group, for a statistically significant increase of $775, or about 8 percent. By Year 3, the increase in after-bonus earnings was small and statistically insignificant.
- Paycheck Plus led to a large and sustained increase in tax filing rates, and particularly in the use of VITA sites to file taxes. In the third year of the program, 44 percent of the control group filed their taxes. Paycheck Plus increased the filing rate by 9 percentage points, sustaining the impacts from the first two years of the program. Additionally, the program produced a nearly fivefold increase in filing taxes at a VITA site.
- The program in Atlanta did not affect child support payment rates among noncustodial parents. Paycheck Plus might be expected to affect the payment of child support through the additional income provided by the bonus or through increased work or earnings. Among noncustodial parents in the study sample, no effects on child support payments were observed through Year 3.
The Atlanta study did not measure effects on other secondary outcomes, including family formation, criminal justice involvement, and health status. The findings from this report, taken in combination with the New York findings, highlight the importance of testing an idea in multiple locations.
The Atlanta Paycheck Plus Demonstration is a part of the Subsidized and Transitional Employment Demonstration (STED), a large-scale research demonstration designed to build rigorous evidence on the effectiveness of the latest generation of subsidized models.
Girley Wright is a Senior Program Analyst in OPRE’s Division of Economic Independence. Her portfolio includes topics related to self-sufficiency, employment, and the well-being of low-income individuals, including subsidized employment and TANF-related issues. She has a particular interest in strategies that will improve the skills of low-income workers.