QUARTERLY JOURNAL OF ECONOMICS
After-Tax Income of a Single Mother with Two Children Minus a Single Woman without Children: 1984, 1988, 1992, 1996
All numbers are in 1996 dollars deated with the Personal Consumption Ex- penditures Deator. All women are assumed to have only earned income and to take the standard deduction. Single women with children and without children are assumed to le as head of household and single, respectively. After-tax income is income after federal taxes or credits.
dren) that ranged from $500 to $1500 (unless noted, all dollar amounts are in 1996 PCE deated dollars). Most of this increase was due to large increases in both the maximum credit and the earnings level before the credit phase-out began. The most strik- ing feature of Figure II is the large 1994 –1996 expansions, which disproportionately affected women with two or more children. For example, the take-home pay difference for women with $7500 of earnings increased only about $600 between 1984 and 1993, but increased over $1500 between 1993 and 1996. Unlike the earlier expansions, those since 1993 dramatically increased the take- home-pay difference for very low income women (earnings under $10,000) due to large increases in the credit rate and maximum credit.
As well as federal income tax changes, we incorporate in this study the effects of state income taxes including state EITCs. By 1994 seven states had their own EITCs. The largest ve of these states began their credit during the period we examine. All of the state EITCs were set as a fraction of the federal EITC and thus increased when it did. There were other state income tax changes during our sample period that reduced taxes for single mothers. More than a dozen states increased their personal exemption, increased their child credit, added a higher standard deduction, or added a separate tax schedule for household heads.