Extending the EITC to Noncustodial Parents: Potential Impacts and Design Considerations

Submitted to:
Office of the Assistant Secretary for Planning and Evaluation (ASPE)
U.S. Department of Health and Human Services

Submitted by:
The Urban Institute

Authors:
Laura Wheaton and Elaine Sorensen

Under current federal income tax rules, low-income noncustodial parents are ineligible for the EITC benefits available to low-income families with children, even when they support their children through full payment of child support. While the EITC and child support have successfully removed many low-income working families from poverty, the combined effect of taxes and child support payments can impoverish noncustodial parents working at or near the minimum wage. Noncustodial parent (NCP) EITC policies work to reduce this disparity. This report provides background and rationale for an NCP EITC. It examines three policy scenarios for a national NCP EITC, which are based on the NCP credits adopted by New York and Washington, D.C., and proposed in S. 1626. Estimates are provided for the number of noncustodial parents who would be eligible for an NCP EITC and for the size of the benefit and overall cost. Lastly the report identifies key design and implementation issues to be considered when enacting an NCP EITC.