Do Single Mothers in the United States use the Earned Income Tax Credit to Reduce Unsecured Debt?
H. Luke Shaefer, Xiaoqing Song, and Trina R. Williams Shanks, University of Michigan
The Earned Income Tax Credit (EITC) is a refundable credit for low-income workers that is mainly targeted at families with children. This study uses the Survey of Income and Program Participationís (SIPP) topical modules on Assets & Liabilities to examine the effects of EITC expansions during the early 1990s on the unsecured debt of the households of single mothers. We use two difference-in-differences comparisons over the study period 1988 to 1999, first comparing single mothers to single childless women, and then comparing single mothers with two or more children to single mothers with exactly one child. In both cases we find that the EITC expansions are associated with a relative decline in the unsecured debt of affected households of single mothers. This suggests that single mothers may have used part of their EITC to limit the growth of their unsecured debt during this period.
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