Extending the EITC to Noncustodial Parents: Potential Impacts and Design Considerations. IV. Noncustodial Parents: Earnings, Payment of Child Support, and EITC Eligibility

05/23/2009

The estimates presented here are generated by the TRIM3 (Transfer Income Model Version 3) microsimulation model using data from the 2005 Annual Social and Economic Supplement to the Current Population Survey (ASEC).[11] The ASEC provides detailed demographic information and 2004 income data for a nationally representative sample of households. The ASEC does not identify noncustodial parents, so TRIM3 imputes noncustodial parent status and child support payment characteristics based on information obtained from the Survey of Income and Program Participation (SIPP), Current Population Survey Child Support Supplement, and child support enforcement administrative data. We model 2008 federal income tax rules, deflating the dollar amounts to 2004 levels for consistency with the 2004 income data.

We estimate that there were 11.9 million noncustodial parents in 2004 (table 2). Our estimates exclude institutionalized noncustodial parents and families in which the child lives with neither parent, but include all other noncustodial parents resident within the United States, including those for whom paternity has not been established or there is no child support order. We include noncustodial parents who have a case with the Child Support Enforcement (IV-D) Program, noncustodial parents who have private child support orders, and noncustodial parents who have had no involvement with the public or private child support system.

Table 2:
Estimated Earnings and Child Support Payment Status of Noncustodial Parents in 2004
Earnings1 Noncustodial Parents (1000s)2 Percent Paying
No Child Support3 Some of Child Support Due All of Child Support Due
<=0 1,655 84% 12% 4%
0<-$5,000 502 68% 29% 3%
$5,000-<$10,000 452 68% 24% 8%
$1-$9,999 954 68% 27% 5%
$10,000-$19,999 1,461 62% 22% 16%
$20,000-$29,999 1,755 57% 18% 25%
$30,000-$39,999 1,398 52% 16% 32%
$40,000+ 4,692 49% 14% 37%
Subtotal $1-$29,999 4,170 61% 22% 17%
Total 11,915 58% 17% 25%
Source: TRIM3 Microsimulation Model Using Data from the 2005 ASEC.
1 Earnings include earnings of a spouse, if present.
2 Noncustodial parents represented here exclude institutionalized parents and cases in which the child
   lives with neither parent, but include all other noncustodial parents resident within the United States,
   including those for whom paternity has not been established or there is no child support order.
3 The "no child support" column includes cases where paternity has not been established or there is no
   formal child support order, as well as cases where the noncustodial parent pays none of the support due.

The NCP EITC policies considered here require full payment of child support due under a child support order, a requirement that the majority of noncustodial parents do not meet. Of the estimated 11.9 million noncustodial parents in 2004, 25 percent paid all child support due under a child support order during the year, and another 17 percent paid some of the support due. Those not paying any support include cases for which paternity has not been established or there is no child support order, as well as cases where an order has been established but the noncustodial parent does not pay any of the required child support. Full payment is less likely at lower earnings levels. Seventeen percent of noncustodial parents with earnings below $30,000 and 5 percent of noncustodial parents with earnings below $10,000 paid the full amount of child support due under a child support order.[12]

An NCP EITC might require that a noncustodial parent have a case with the IV-D program (as in New York and Washington, D.C.). However, our NCP EITC estimates include all noncustodial parents who pay their child support in full, including those who do not participate in the IV-D program. Most noncustodial parents who would be income and child support eligible for an NCP EITC participate in the IV-D program, and others might request IV-D services to become eligible for an NCP EITC requiring IV-D participation.[13]

Under current EITC rules, noncustodial parents may be eligible for the “childless” EITC or (if they have children living with them) the child-based EITC. However, they cannot receive the EITC on behalf of their children living elsewhere. We estimate that 19 percent of noncustodial parents are eligible for the EITC: 5 percent are eligible for the childless EITC, and 14 percent are eligible for the child-based EITC (table 3). In the earnings range most likely to be affected by the New York– and D.C.-based EITC scenarios (earnings under $30,000), we estimate that 14 percent of noncustodial parents are eligible for the childless EITC and 31 percent are eligible for the child-based EITC.[14] At the lowest earnings level ($1 to $9,999), 46 percent of noncustodial parents are eligible for the childless EITC and 24 percent are eligible for the child-based EITC.[15]

Table 3: Estimated EITC Eligibility of Noncustodial Parents
Earnings1 Noncustodial Parents (1000s)2 Percent of Noncustodial Parents who are:
Ineligible for EITC Eligible for EITC
Total Childless Child-Based
<=0 1,655 100% 0% 0% 0%
$1-$9,999 954 30% 70% 46% 24%
$10,000-$19,999 1,461 58% 42% 10% 31%
$20,000-$29,999 1,755 65% 35% 0% 35%
>$30,000-$39,999 1,398 76% 24% 0% 24%
>$40,000+ 4,692 100% 0% 0% 0%
>Subtotal $1-$29,999 4,170 55% 45% 14% 31%
>Total 11,915 81% 19% 5% 14%
Source: TRIM3 Microsimulation Model Using Data from the 2005 ASEC. EITC eligibility is estimated on 2004 income using 2008 rules deflated to 2004 dollars.
1 Earnings include earnings of a spouse, if present.
2 Noncustodial parents represented here exclude institutionalized parents and cases in which the
  child lives with neither parent, but include all other noncustodial parents resident within the United
  States, including those for whom paternity has not been established or there is no child support order.

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