More About Indivar Dutta-Gupta

Indivar Dutta-Gupta

Indivar Dutta-Gupta joined the Center as Policy Advisor in January 2011. His work primarily focuses on federal budget and tax policies and cross-cutting low-income issues.

Full bio and recent public appearances | Research archive at CBPP.org


EITC Even Better for Children than We Thought

July 17, 2012 at 10:25 am

We previously showed that the Earned Income Tax Credit (EITC) for low-income workers lifts more children out of poverty than any other public program.  More recent research suggests that the income assistance it provides is even better for children — our nation’s future workforce — than we thought, helping them succeed both as students and, in adulthood, as workers.

Improving school performance. For children in low-income working families, research shows that earnings supplements like the EITC can be very beneficial in times of need.  As our recent paper explains, three separate teams of highly regarded researchers have found that young children in very low-income families do better in school if their families receive additional income from the EITC or (in some of the studies) similar work-based supports.  

Boosting children’s work hours and earnings in adulthood. The benefits of the EITC and other income-boosting measures appear to carry over into young children’s adulthood. Two studies show that young children in low-income families that receive the type of income support that the EITC offers are likely to work more and earn more as adults.

  • Raising family income through refundable tax credits (primarily the EITC) makes it more likely that children in the family will attend college and raises their earnings as adults, according to research by Raj Chetty and John N. Friedman of Harvard University and Jonah Rockoff of Columbia University.  The authors conclude that “a substantial fraction of the cost of tax credits may be offset by earnings gains in the long run.”
  • Children in low-income families that received an annual income boost of $3,000 (in 2005 dollars) between their prenatal year and fifth birthday earned an average of 17 percent more as adults, and worked 135 hours more annually, than similar children whose families didn’t receive the added income, according to research by Greg J. Duncan of the University of California (Irvine), Kathleen Ziol-Guest of Cornell University, and Ariel Kalil of the University of Chicago.

The additional 135 hours of work is nearly a third of the gap in adult work hours between children raised in poor families and children raised in families above twice the poverty line.

In short, the EITC boosts the work and earnings not only of single mothers, but also of their children.

The Unfinished War on Poverty

July 5, 2012 at 11:17 am

Fifty years after Michael Harrington’s groundbreaking book, The Other America, shed light on widespread poverty in the United States, Demos, CBPP, and the Georgetown Center on Poverty, Inequality, and Public Policy will hold a conference next Tuesday where we’ll examine factors affecting poverty today and promising strategies for lifting and keeping Americans out of poverty.

With that anniversary in mind, we thought we’d take a look at the important role that public benefit programs have played in reducing poverty.

In his 1964 State of the Union, President Lyndon Johnson announced an “unconditional war on poverty in America.”  That same year, Sargent Shriver, a key Johnson advisor on poverty issues, argued that we could set 1976 as “the target date for ending poverty in this land.”

We made enormous progress during those years.  The poverty rate under the official measure of poverty, which counts only cash income, fell by half between 1959 and 1973, from 22 percent to 11 percent.

Despite these early and impressive successes, millions of Americans today live with incomes below the poverty line.  A major reason why we didn’t make even more progress is that beginning in the mid-1970s, economic growth no longer meant rising incomes for everyone.  That was a sharp change from the previous post-war years, in which a growing economy led to a roughly similar rate of growth in family incomes whether one was poor, middle class, or wealthy.

Research by economist Sheldon Danziger of the University of Michigan’s National Poverty Center indicates that if the relationship between economic growth and median earnings growth from 1959 to 1973 had continued in the years after 1973, official income poverty would have fallen to very low levels.  It’s clear that the surge in income inequality was an important factor in impeding progress.

The growth in inequality has made government’s role in fighting poverty even more important.  Public benefits delivered through benefit programs and tax credits are very effective (see chart), lifting about one in ten Americans out of poverty each year.  We all need to do more, however, if we are to reduce poverty further.

My colleague, Arloc Sherman, using a measure of poverty that is more comprehensive than the official measure and includes non-cash benefit programs and tax credits, finds that public benefits cut poverty nearly in half in 2010, despite the deepest recession in generations.

Widely shared economic prosperity is critical for poverty reduction, and the growth in income inequality is now placing added importance on public benefits and tax credits in keeping poverty from climbing still higher.

The EITC: Our Strongest Tool for Boosting Single Mothers’ Employment

June 28, 2012 at 12:38 pm

You might know that research consistently shows that the Earned Income Tax Credit (EITC) significantly boosts work effort, especially among single mothers with limited education.  But you might not realize just how effective the EITC is.

Research by economists Bruce D. Meyer of the University of Chicago and Dan T. Rosenbaum of the University of North Carolina at Greensboro found that EITC expansions between 1984 and 1996 were responsible for more than half of the large increase in employment among single mothers during that period. The biggest gains in employment attributable to the EITC were for mothers with young children and mothers with low education levels.

Even more striking, a highly regarded study by University of Chicago economist Jeffrey Grogger found that the EITC expansions enacted in the 1990s “appear to be the most important single factor in explaining why female family heads [of households] increased their employment over 1993-1999.”

In other words, the EITC expansions did more to boost employment among single mothers than the 1990s overhaul of the welfare system, as the chart shows.  Recent proposals to build on the purported success of the 1996 welfare law by block-granting SNAP (food stamps) and other programs ignore this fact.

The EITC’s proven success as a work incentive explains why expanding it should be central to any initiative to raise employment among low-income individuals.

At the moment, of course, jobs are still scarce, so job inducements like the EITC aren’t likely to be as effective at putting people to work as they would be in a stronger labor market.  Still, as the economy improves, the EITC and policies like it are promising.

A good place to start would be to strengthen the very small EITC for workers not raising children.  This would be especially beneficial for less-educated single men, who have fared poorly in the labor market for many years — including prior to the recession, when employment among single mothers rose substantially (in no small part due to the EITC).

The Pro-Work, Anti-Poverty EITC

June 26, 2012 at 1:47 pm

A House Ways and Means subcommittee will hold a hearing tomorrow on how the structure of safety-net programs like the Earned Income Tax Credit (EITC) affects recipients’ work incentives.

As our new report explains, numerous studies have found that the EITC not only encourages work but also reduces poverty, helps families meet basic needs, and improves children’s achievement in school and likely increases their earnings as adults.  The Child Tax Credit (CTC), a related tax credit designed to help offset the cost of raising children, also plays a pivotal role in helping low-income families.

For example:

  • Encouraging work. Numerous studies have found that the EITC promotes work.  “[T]he overwhelming finding of the empirical literature is that EITC has been especially successful at encouraging the employment of single parents, especially mothers,” write economists Nada Eissa of Georgetown University and Hilary Hoynes of the University of California, Davis.  In fact, while policymakers often point to the 1996 welfare law’s creation of Temporary Assistance for Needy Families (TANF) as the primary reason for increased work among single mothers, the research indicates that expansion of the EITC had a larger effect than the welfare law in producing these gains.
  • Reducing poverty. The EITC and CTC lifted 9.2 million people — including 4.9 million children — above the poverty line in 2010, under a broad measure of poverty that counts refundable tax credit payments as income (and subtracts income and payroll taxes).  (See graph.)  Improvements in these credits enacted as part of the 2009 Recovery Act are responsible for lifting 1.6 million of those people above the poverty line.
  • Providing a short-term safety net. Most EITC recipients claim the credit only temporarily when a job disruption or other significant event reduces their income.  A recent study found that, of people who received the EITC over an 18-year period, 61 percent received the credit for only one or two years at a time. A forthcoming study finds that over time, EITC recipients as a whole pay far more in federal income taxes than they receive in EITC benefits.
  • Improving children’s school performance and increasing their work effort and earnings as adults. A small but growing body of research indicates that lifting the incomes of low-income families helps children in those families do better in school.  The added income may help children later in life, as well:  recent research finds that raising a poor family’s income by $3,000 a year (a fairly typical amount for a poor family to receive from the CTC and EITC) between a child’s prenatal year and fifth birthday is associated with a significant increase in the child’s earnings in adulthood.  The leading study finds a 17 percent increase in earnings in adulthood, and an average of 135 hours of additional work per year, compared to similar children whose families do not receive the increase in income.

Click here for the full report.

Vote to Eliminate SSBG Program for Vulnerable People Continues Disturbing Pattern

May 4, 2012 at 11:43 am

The House Budget Committee will consider a package of budget cuts next week that includes eliminating the Social Services Block Grant (SSBG).  The Ways and Means Committee voted last month to eliminate the $1.7 billion-a-year program, which states use to help fund specialized services to some of their most vulnerable populations, primarily low- and moderate-income children and the elderly and disabled.

As our new paper explains, eliminating the SSBG is unjustified on its own terms and particularly troubling in the context of other cuts the House is considering.

The SSBG supports services designed to help people become more self-sufficient, prevent and address child abuse, and support community-based care for the elderly and disabled.  For example, roughly a quarter of SSBG funds help vulnerable and elderly adults, such as through day care services to help elderly adults continue living in their own homes and protective services to address abuse and exploitation of older adults.

Although the SSBG has received bipartisan support from governors and members of Congress, funding has already fallen 77 percent since 1981 due to inflation, funding freezes, and budget cuts (see graph).  That’s made it much harder over time for states to continue the services it supports.

Contrary to recent claims that the SSBG duplicates other federal programs, states use it to provide services for which there is no dedicated funding stream or where funding is inadequate.  Child care assistance is a good example:  despite the various funding streams used to support it, only one in six low-income working families eligible for federally supported child care assistance actually receives it.  Eliminating the SSBG would worsen that shortage.

It’s also worth noting that the Government Accountability Office (GAO)’s recent comprehensive survey of duplication and overlap in the federal government makes no mention of any duplication related to the SSBG.

The effort to eliminate the SSBG is part of a disturbing pattern.  As our report explains:

Voting to eliminate the SSBG continues a troubling recent trend in the House of cutting or eliminating programs that help vulnerable people.  The House budget requires the Ways and Means Committee to find $53 billion in savings over ten years.  The Committee has the tax code within its jurisdiction, including about $1 trillion a year in tax expenditures, many of which are heavily weighted toward upper-income households.  Yet it chose not to obtain any of its required savings by narrowing tax breaks, regardless of their merits.  Instead, it found $68.2 billion in cuts — more than the required savings — exclusively from programs designed to help low-income, uninsured, and otherwise vulnerable people.

We’ll provide more analysis of the proposed House cuts next week.

Taking Stock of the Safety Net, Part 6: It Works, But It Doesn’t Do Enough

December 21, 2011 at 5:35 pm

As we’ve shown in our blog series over the past week, millions more Americans would face poverty and severe hardship without programs like TANF, housing assistance, SNAP (food stamps), and unemployment insurance — as well as other programs that this series didn’t focus on, such as Social Security and the Earned Income Tax Credit.

Still, the tax code and government transfer programs do less than they could or should to reduce poverty.

U.S. Poverty Rate Is High After Taxes and Transfers Compared to Similarly Wealthy Countries

Other similarly wealthy countries have far lower rates of poverty after factoring in the impact of safety net programs even though, on average, they have similar rates of poverty before counting these programs (see chart).  That’s true largely because nearly all of these other countries do more: their programs are more generous, easier to access, and broader in scope than those in the U.S.

Let’s remember:  people need these programs because they either receive inadequate wages or cannot work.  For many working Americans, a job alone is inadequate to lift a family out of poverty.  Economic Policy Institute data show that in 2007 (the most recent year available), over 25 percent of all workers received wages that were inadequate to keep a family of four out of poverty.

These programs also help support many people who cannot work, including children, the elderly, and people with significant disabilities, as well as able-bodied adults who cannot secure adequate employment because jobs are scarce.

The safety net also helps push back against growing inequality, though not as effectively as it once did.

And research shows that keeping young children out of poverty helps them succeed in school and earn more as adults.

As policymakers consider proposals to address medium- and long-term deficits, they should keep these facts in mind and avoid cuts that would worsen the nation’s already high rates of poverty and inequality.  To further reduce poverty and inequality, we’ll eventually need to spend more in a fiscally responsible way.  We’ll also need to make our tax system more progressive — and do so in a way that raises more revenues to meet the nation’s pressing needs and promotes more broadly shared prosperity.

New Poverty Measure Shows Government’s Anti-Poverty Impact

November 9, 2011 at 11:52 am

[This commentary, on the experimental measure of poverty that the Census Bureau released this week, first appeared in Spotlight on Poverty and Opportunity.]

The Census Bureau’s release of the Supplemental Poverty Measure (SPM) makes clear, in a way that the traditional poverty measure cannot, that federal and state programs significantly reduce the extent and depth of poverty.

The official measure counts only cash income and does not include in-kind benefits or tax credits, whereas the SPM captures a much broader array of safety net programs. The SPM shows that on an ongoing basis, but especially in response to this recession, the Earned Income Tax Credit kept approximately six million above the poverty line in 2010, and the Supplemental Nutrition Assistance Program (formerly food stamps) kept more than four million above the poverty line. This provides proof that these programs help protect American families from poverty caused by low pay, job loss, disability, old age, and other vulnerabilities and misfortune that President Franklin Roosevelt called the “vicissitudes of life.” Such findings come when many benefits are under attack, and they serve as a powerful antidote to the myth that this assistance can be cut without significant harm. Policymakers should take heed and extend or protect these polices.

Read more…

New Research Highlights Importance of EITC for Working Families

October 19, 2011 at 2:49 pm

New research shows that a larger share of families than we might think turn to a key federal work support — the Earned Income Tax Credit (EITC) — but that most of them receive the credit for only a year or two at a time.

Taken together with other research, the new study suggests that while the EITC helps some workers who are persistently paid low wages, for most families who use it, the credit provides effective but temporary help during hard times.

Most Earned Income Tax Credit Recipients Get the Credit for Two Consecutive Years or Less

The study, from Tim Dowd of the Joint Committee on Taxation and John Horowitz of Ball State University, examined EITC use from 1989 to 2006 and found:

  • Approximately half of all taxpayers with children used the EITC at least once during this 18-year period.
  • A large majority (61 percent) of those using the EITC did so for only one or two years at a time — only 20 percent used it for more than five straight years (see graph).

The EITC goes to working people — the overwhelming majority of them families with children — with incomes up to roughly $49,000.  Earlier unpublished research from Dowd and Horowitz found that EITC users pay much more in federal income taxes over time than they receive in EITC benefits.  Taxpayers who claimed the EITC at least once during the 18-year period from 1989 through 2006 paid several hundred billion dollars in net federal income tax over this period, after subtracting the EITC and any other refunds.

Dowd and Horowitz’s new study also found that EITC use is highest when children are youngest — which is also when parents’ wages are lowest.  (Working parents’ wages rise, on average, as their children grow up.)  This finding is particularly important given the importance of income for young children’s learning and the evidence that poverty in early childhood may reduce children’s earnings as adults.

Why the Upcoming Poverty Numbers Matter

September 12, 2011 at 2:12 pm

The Census Bureau will release figures tomorrow detailing the level of poverty in America in 2010.  (We’ve issued brief pieces explaining what to look for in the new figures on poverty and health coverage.)  The figures won’t show what it’s like to be poor, but other government data suggest that families living below or only modestly above the poverty line — which was about $22,300 for a family of four in 2010 — are the most likely to face daily hardships and that living in poverty can have damaging consequences over the long term.  For example:

Poor Households Much More Likely to Experience Hardships

  • Nearly half (44 percent) of poor households with children were “food insecure” in 2010, according to the Agriculture Department, meaning that at times they had trouble affording sufficient food.  For households with incomes above 185 percent of the poverty line, this rate was 9 percent.
  • About half (48 percent) of all poor households with children in 2005 reported one or more of four major hardships:  they faced food insecurity with hunger, lived in overcrowded conditions, were behind on rent or mortgage payments, and/or were unable to go to the doctor or hospital when they needed to (see graph).
  • Poor children were more than 70 percent more likely to lack health coverage than non-poor children in 2009.  Over 15 percent of poor children were uninsured, compared to under 9 percent of non-poor children.

Moreover, as we’ve pointed out, research shows that poverty among young children not only slows them down in school but also may significantly shrink their earnings as adults.

Some people have suggested that many households living below the poverty line have too many possessions to be considered truly poor.  But some of the possessions they cite, like a refrigerator or stove, are everyday necessities.  And many were likely purchased before a job loss, serious illness, or other event pushed a family into poverty.  Some families move in and out of poverty; nearly two out of five people living in poverty in 2006 were not poor two years earlier, for example.

The reality is that living in poverty places people at higher risk of hardship and is a significant barrier to equal opportunity.