TIMING IS MONEY: DOES LUMP-SUM PAYMENT OF THE EARNED INCOME TAX CREDIT AFFECT SAVINGS AND DEBT?

Lauren E. Jones, Katherine Michelmore

Research output: Contribution to journalArticlepeer-review

Abstract

Earned income tax credit (EITC) benefit income is paid out in a lump-sum around tax time. We investigate whether savings and debt among EITC-eligible families reflect the timing of payments. Using nationally representative, individual-level data on self-reported debt and savings outcomes, we search for differences in monthly behavior between EITC-eligible and -ineligible households. We find evidence that credit card and unsecured debt holding among EITC-eligible families reflects the timing of the EITC, with low debt levels at tax time relative to other months. Debt holding among ineligible families with children does not exhibit a similar pattern. We find limited evidence of intrayear patterns in savings behavior among EITC-eligible families. (JEL D14, I38, H23).

Original languageEnglish (US)
Pages (from-to)1659-1674
Number of pages16
JournalEconomic Inquiry
Volume57
Issue number3
DOIs
StatePublished - Jul 2019

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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