Paycheck Plus Pays Off for Low-Wage Single Adults

Paycheck Plus, a tax credit program supported by NYC Opportunity, is increasing employment and income among single working people who do not have dependent children, according to early results from an ongoing demonstration. Paycheck Plus expands the Earned Income Tax Credit (EITC), which is currently targeted to workers with dependent children.

Paycheck Plus has a wide variety of benefits, the demonstration found. It put an average of $1,400 more a year into participants’ pockets for two years — and that money made a clear difference in the participants’ lives.

Participants in Paycheck Plus were found to be more likely to work and, in the case of non-custodial parents, to pay child support. Paycheck Plus also increased the rate at which participants filed taxes, took advantage of free tax preparation services, and applied for EITC.

Paycheck Plus leverages EITC, one of the most successful anti-poverty programs in the United States — and one that has long received bipartisan support. Every year, EITC proves its power as an antipoverty tool, lifting 6.5 million Americans out of poverty, about half of them children. EITC encourages and rewards work. The extra money EITC participants receive through tax credits helps them put food on the table, pay for transportation to work, purchase school supplies, and much more. With initial support from NYC Opportunity, New York City has put in place a robust, multi-agency effort to help eligible New Yorkers claim the EITC that includes targeted outreach by the Department of Finance, as well as education and support for free tax preparation, spearheaded by the Office of Financial Empowerment at the Department of Consumer Affairs.

A weakness of EITC is that it offers little help to working poor people without dependent children, who are a large part of the low-wage working population. In 2016, EITC provided a maximum credit of $506 for these workers, which reduced to $0 when their earnings reached $14,880. (An adult with two dependent children can receive up to $5,572 a year.)

Paycheck Plus aims to help fill this gap. It offers up to $2,000 a year over three years to single workers without dependent children who make up to $30,000 a year. (Paycheck Plus does not use the tax system directly, but it works to mimic the effect of a tax credit.) The early results of the demonstration show that it is helping this group in a variety of ways — and suggest that if EITC is expanded to more single adults nationwide, it could have benefits for millions more Americans.

The full interim results of the pilot program will be published later this summer, with final results anticipated in 2018. Read more about the early results on MDRC’s website.

Originally published at http://www1.nyc.gov/site/opportunity/news/006/paycheck-plus-pays-off-low-wage-single-adults on June 17, 2017.