• AEA in the news
  • April 10, 2017

How Filing Taxes Benefits Poor People

Low-income individuals who filed a tax return for 2007 were less likely to live in poverty in subsequent years.

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The Boston Globe cited a forthcoming paper in the American Economic Journal: Economic Policy about how poor people can benefit from filing tax returns. In the paper, co-authors Shanthi P. Ramnath and Patricia K. Tong found that low-income individuals who filed a tax return for 2007 — the year that filing was required to get a stimulus payment in 2008 — were less likely to live in poverty in subsequent years. In those years, their earnings were higher and they were more likely to claim the Earned Income Tax Credit, demonstrating how temporary incentives to participate in the tax system can have longer term effects on economic activity and poverty.