Comparing in-work benefits and financial work incentives for low-income families in the US and the UK

In-Work Benefits for Married Couples: An Ex-Ante Evaluation of EITC and WTC Policies in Italy

“…In-work benefits in the US and the UK have been discussed and compared in several studies, including Dickert et al (1995), Eissa and Liebman (1996), Liebman (1998), Blundell (2000), Brewer (2000), Blundell et al (2000), Meyer and Rosenbaum (2001), Neumark and Wascher (2001), Blundell et al (2002), Blundell and Hoynes (2004), Eissa and Hoynes (2004), Brewer et al (2006), Francesconi and van der Klaauw (2007), Leigh (2007), Gregg et al (2009), Brewer et al (2010), and Blundell and Shephard (2012), among others. In this section, we briefly review the design of these income support mechanisms to emphasize their disincentives on secondary earners.…”

Credit where it's due? An assessment of the new tax credits

“…c It is not inevitable that a tax credit system based on gross income will produce marginal withdrawal rates of over 100 per cent. The earned income tax credit (EITC) in the USA, for example, depends upon gross income, and marginal deduction rates need not rise above 60 per cent (see Brewer (2001a)). But the government needs to take great care that marginal withdrawal rates remain below 100 per cent when changing taxes or taper rates.…”

“…Without the WFTC, a single person with one child and renting would be only £30.54 better off in a 30-hour-a-week minimum-wage job (or £41.74 for 40 hours; these figures would be lower if the lone parent had more than one child). Given childcare, which adds to the cost of working, there is clearly a strong justification for having an in-work benefit for people with children, and, with WFTC, a single person with a child receives £65.40 more for working 30 hours relative to not working (or almost £75.50 for working 40 hours; see also Brewer (2000)). The case is simply not as strong for families with no children.…”

Combining Welfare‐to‐Work Measures with Tax credits: A New Hybrid Approach to Social Security in the United Kingdom

“…In the United King dom, a tax credit scheme was pro posed by Ed ward Heath's Con ser va tive government in 1972 (HM Trea sury, 1972) but the pro posal lapsed when the gov ern ment was de feated in the gen eral elec tion of 1974, be fore leg is la tion could be en acted, and the in com ing La bour gov ern ment did not pur sue the mat ter. 1 In the United States, earned-in come tax cred its were in tro duced in 1975 and have since be come a key plank in the fed eral gov ern ment's "anti-pov erty strat egy" (Brewer, 2000). How ever, the pro mo tion of ac tive la bour mar ket pol i cies, in the form of a range of wel fare-to-work programmes, and a va ri ety of tax credit schemes that pro vide in-work ben e fits and are de signed to en sure that peo ple are better off in work, is both new and dis tinc tive.…”