Open Access Honors Program Thesis
The federal government spends billions of dollars annually on programs to lift low income workers out of poverty, but the money is not necessarily efficiently spent. If the benefits provided by the government provide a work incentive, then to increase the income of a worker by $1 requires more than $1 in government funds. Some programs, however, do provide an incentive for people to work. Given the complexity of the federal bureaucracy, few people have tried to compute the income that minimum wage workers would expect to earn given a set of government benefits that they receive and a number of hours that they work. The studies that have analyzed the benefits that minimum wage workers would receive (generally marginal tax studies) do not address the nuances of state tax codes and state EITC benefits. It is important to study the benefits that workers would expect to receive while taking into account multiple programs, because many federal programs designed to help the poor provide different work incentives and affect the same group of workers. A precise computation of expected benefits will yield data that economists could use to estimate more accurately the labor supply responses to and the effectiveness of various government programs. Such computations could yield insight into previously unrecognized inefficiencies and work disincentives. Using government data from various state and federal agencies of 4 7 states and the District of Columbia, I compute benefits that a minimum wage workers would expect to earn given their earnings, federal payroll taxes, state and federal income taxes, the state and federal Earned Income Tax Credit (EITC), and benefits from the Food Stamp Program.
Year of Submission
Department of Economics
University Honors Designation
A thesis submitted in partial fulfillment of the requirements for the designation University Honors
1 PDF file (46 pages)
©2006 Aaron William Popp
Popp, Aaron William, "The Earned Income Tax Credit, Taxes, and Food Stamps: Their Effects on Minimum Wage Workers by State" (2006). Honors Program Theses. 647.