Finance and Economics Discussion Series (FEDS)

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August 2017

Whose Child Is This? Shifting of Dependents Among EITC Claimants Within the Same Household

David Splinter, Jeff Larrimore, and Jacob Mortenson

Abstract:

Using a panel of household level tax data, we estimate the degree to which dependents are “reassigned” between tax units within households, and how these reassignments affect combined tax liabilities. Reassigning dependents reduces combined tax liabilities on average, suggesting some household level coordination. Additionally, when EITC benefits expanded in 2009, reassignments increasingly involved adding a third child to tax returns to claim these new benefits. However, the subgroup reassigning towards three child tax units actually increased total household tax liabilities, suggesting that some taxpayers may prioritize minimizing their own tax burden or focus on particularly salient aspects of tax policy.

Accessible materials (.zip)

Keywords: earned income tax credit, household level tax coordination, tax avoidance

DOI: https://doi.org/10.17016/FEDS.2017.089

PDF: Full Paper

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Last Update: January 09, 2020