We reassess the antipoverty effects of the EITC using unique data linking the CPS Annual Social and Economic Supplement to IRS data for the same individuals spanning years 2005-2016. We compare EITC benefits from standard simulators to administrative EITC payments and find that significantly more actual EITC payments flow to childless tax units than predicted, and to those whose family income places them above official poverty thresholds. However, actual EITC payments appear to be target efficient at the tax unit level. In 2016, about 3.1 million persons were lifted out of poverty by the EITC, substantially less than prior estimates.
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Do Doubled-up Families Minimize Household-level Tax Burden?
September 2014
Working Paper Number:
carra-2014-13
This paper examines a method of tax avoidance not previously studied: the sorting of dependent children among related filers who have 'doubled up' in a household for economic reasons. Using the Current Population Survey Annual Social and Economic Supplement (CPS ASEC) linked with 1040 data from the Internal Revenue Service (IRS), we examine households with children and at least two adult tax filers to determine whether the household minimizes income tax burden, and thus maximizes refunds, by optimally claiming dependents. We examine specifically the relationship between the Earned Income Tax Credit (EITC) and the sorting of dependent children among filers in households. We find the following: The propensity to sort increases as the number of filers who are potentially eligible for the EITC increases; sorting probability increases as the optimal household EITC amount increases; and among households with at least one EITC-eligible filer, the propensity to sort increases as the difference between modeled household EITC amount and the optimal amount increases. We also exploit the 2009 change in EITC benefit for families with three or more children, finding that the propensity to sort to exactly three children increased among EITC-eligible filers after the rule change. The results of this analysis improve our understanding of filing behavior, particularly how households form filing units and pool resources, and have implications for poverty measurement in complex households This presentation was given at the CARRA Seminar, July 16, 2014
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Self-Employment Income Reporting on Surveys
April 2023
Working Paper Number:
CES-23-19
We examine the relation between administrative income data and survey reports for self-employed and wage-earning respondents from 2000 - 2015. The self-employed report 40 percent more wages and self-employment income in the survey than in tax administrative records; this estimate nets out differences between these two sources that are also shared by wage-earners. We provide evidence that differential reporting incentives are an important explanation of the larger self-employed gap by exploiting a well-known artifact ' self-employed respondents exhibit substantial bunching at the
first EITC kink in their administrative records. We do not observe the same behavior in their survey responses even after accounting for survey measurement concerns.
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CTC and ACTC Participation Results and IRS-Census Match Methodology, Tax Year 2020
December 2024
Working Paper Number:
CES-24-76
The Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC) offer assistance to help ease the financial burden of families with children. This paper provides taxpayer and dollar participation estimates for the CTC and ACTC covering tax year 2020. The estimates derive from an approach that relies on linking the 2021 Current Population Survey Annual Social and Economic Supplement (CPS ASEC) to IRS administrative data. This approach, called the Exact Match, uses survey data to identify CTC/ACTC eligible taxpayers and IRS administrative data to indicate which eligible taxpayers claimed and received the credit. Overall in tax year 2020, eligible taxpayers participated in the CTC and ACTC program at a rate of 93 percent while dollar participation was 91 percent.
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Using Linked Survey and Administrative Data to Better Measure Income: Implications for Poverty, Program Effectiveness and Holes in the Safety Net
October 2015
Working Paper Number:
CES-15-35
We examine the consequences of underreporting of transfer programs in household survey data for several prototypical analyses of low-income populations. We focus on the Current Population Survey (CPS), the source of official poverty and inequality statistics, but provide evidence that our qualitative conclusions are likely to apply to other surveys. We link administrative data for food stamps, TANF, General Assistance, and subsidized housing from New York State to the CPS at the individual level. Program receipt in the CPS is missed for over one-third of housing assistance recipients, 40 percent of food stamp recipients and 60 percent of TANF and General Assistance recipients. Dollars of benefits are also undercounted for reporting recipients, particularly for TANF, General Assistance and housing assistance. We find that the survey data sharply understate the income of poor households, as conjectured in past work by one of the authors. Underreporting in the survey data also greatly understates the effects of anti-poverty programs and changes our understanding of program targeting, often making it seem that welfare programs are less targeted to both the very poorest and middle income households than they are. Using the combined data rather than survey data alone, the poverty reducing effect of all programs together is nearly doubled while the effect of housing assistance is tripled. We also re-examine the coverage of the safety net, specifically the share of people without work or program receipt. Using the administrative measures of program receipt rather than the survey ones often reduces the share of single mothers falling through the safety net by one-half or more.
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Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data
September 2009
Working Paper Number:
CES-09-26
Although the vast majority of US research on trends in the inequality of family income is based on public-use March Current Population Survey (CPS) data, a new wave of research based on Internal Revenue Service (IRS) tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates can largely be reconciled once one uses internal CPS data (which better captures the top of the income distribution than public-use CPS data) and defines the income distribution in the same way. Using internal CPS data for 1967'2006, we closely match the IRS data-based estimates of top income shares reported by Piketty and Saez (2003), with the exception of the share of the top 1 percent of the distribution during 1993'2000. Our results imply that, if inequality has increased substantially since 1993, the increase is confined to income changes for those in the top 1 percent of the distribution.
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National Experimental Wellbeing Statistics - Version 1
February 2023
Working Paper Number:
CES-23-04
This is the U.S. Census Bureau's first release of the National Experimental Wellbeing Statistics (NEWS) project. The NEWS project aims to produce the best possible estimates of income and poverty given all available survey and administrative data. We link survey, decennial census, administrative, and third-party data to address measurement error in income and poverty statistics. We estimate improved (pre-tax money) income and poverty statistics for 2018 by addressing several possible sources of bias documented in prior research. We address biases from 1) unit nonresponse through improved weights, 2) missing income information in both survey and administrative data through improved imputation, and 3) misreporting by combining or replacing survey responses with administrative information. Reducing survey error substantially affects key measures of well-being: We estimate median household income is 6.3 percent higher than in survey estimates, and poverty is 1.1 percentage points lower. These changes are driven by subpopulations for which survey error is particularly relevant. For house holders aged 65 and over, median household income is 27.3 percent higher and poverty is 3.3 percentage points lower than in survey estimates. We do not find a significant impact on median household income for householders under 65 or on child poverty. Finally, we discuss plans for future releases: addressing other potential sources of bias, releasing additional years of statistics, extending the income concepts measured, and including smaller geographies such as state and county.
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Granular Income Inequality and Mobility using IDDA: Exploring Patterns across Race and Ethnicity
November 2023
Working Paper Number:
CES-23-55
Shifting earnings inequality among U.S. workers over the last five decades has been widely stud ied, but understanding how these shifts evolve across smaller groups has been difficult. Publicly available data sources typically only ensure representative data at high levels of aggregation, so they obscure many details of earnings distributions for smaller populations. We define and construct a set of granular statistics describing income distributions, income mobility and con ditional income growth for a large number of subnational groups in the U.S. for a two-decade period (1998-2019). In this paper, we use the resulting data to explore the evolution of income inequality and mobility for detailed groups defined by race and ethnicity. We find that patterns identified from the universe of tax filers and W-2 recipients that we observe differ in important ways from those that one might identify in public sources. The full set of statistics that we construct is available publicly as the Income Distributions and Dynamics in America, or IDDA, data set.
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Earnings Measurement Error, Nonresponse and Administrative Mismatch in the CPS
July 2025
Working Paper Number:
CES-25-48
Using the Current Population Survey Annual Social and Economic Supplement matched to Social Security Administration Detailed Earnings Records, we link observations across consecutive years to investigate a relationship between item nonresponse and measurement error in the earnings questions. Linking individuals across consecutive years allows us to observe switching from response to nonresponse and vice versa. We estimate OLS, IV, and finite mixture models that allow for various assumptions separately for men and women. We find that those who respond in both years of the survey exhibit less measurement error than those who respond in one year. Our findings suggest a trade-off between survey response and data quality that should be considered by survey designers, data collectors, and data users.
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Earnings Mobility in the US: A New Look at Intergenerational Inequality
May 2002
Working Paper Number:
CES-02-11
This study uses a new data set that contains the Social Security earnings histories of parents and children in the 1984 Survey of Income and Program Participation, to measure the intergenerational elasticity in earnings in the United States. Earlier studies that found an intergenerational elasticity of 0.4 have typically used only up to five-year averages of fathers' earnings to measure fathers' permanent earnings. However, dynamic earnings models that allow for serial correlation in transitory shocks to earnings imply that using such a short time span may lead to estimates that are biased down by nearly 30 percent. Indeed, by using many more years of fathers' earnings than earlier studies, the intergenerational elasticity between fathers and sons is estimated to be around 0.6 implying significantly less mobility in the U.S. than previous research indicated. The elasticity in earnings between fathers and daughters is of a similar magnitude. The evidence also suggests that family income has an even larger effect than fathers' earnings on children's future labor market success. The elasticity of earnings is higher for families with low net worth, offering some empirical support for theoretical models that predict differences due to borrowing constraints. Some evidence of a higher elasticity among blacks is found but the results are not conclusive.
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Redistribution in the Current U.S. Social Security System
April 2002
Working Paper Number:
CES-02-09
Because its benefit formula replaces a greater fraction of the lifetime earnings of lower earners than of higher earnings, Social Security is generally thought to be progressive, providing a 'better deal' to low earners in a cohort than to high earners. However, much of the intra-cohort redistribution in the U.S. Social Security system is related to factors other than lifetime income. Social Security transfers income from people with low life expectancies to people with high life expectancies, from single workers and from married couples with substantial earnings by the secondary earner to married one-earner couples, and from people who work for more than 35 years to those who concentrate their earnings in 35 or fewer years. This paper studies the redistribution accomplished in the retirement portion of the current U.S. Social Security system using a microsimulation model built around a match of the 1990 and 1991 Surveys of Income and Program Participation to Social Security administrative earnings and benefit records. The model simulates the distribution of internal rates of returns, net transfers, and lifetime net tax rates from Social Security that would have been received by members of the 1925 to 1929 birth cohorts if they had lived under current Social Security rules for their entire lives. The paper finds that annual income-related transfers from Social Security are only 5 to 9 percent of Social Security benefits paid, or $19 to $34 billion, at 2001 aggregate benefits levels, when taxes and benefits are discounted at the cohort rate of return of 1.29 percent. At higher discount rates, Social Security appears to be more redistributive by some measures, and less redistributive by others. Because much of the redistribution that occurs through Social Security is not related to income, the range of transfers received at a given level of lifetime income is quite wide. For example, 19 percent of individuals in the top lifetime income quintile receive net transfers that are greater than the average transfer for people in the lowest lifetime income quintile.
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