Defrauding the American Taxpayer - The Earned Income Tax Credit EITC and Population Growth

A very interesting post from www.Vdare.com about the Earned Income Tax Credit. This follows this post about the Gang of 6 debt plan. This follows this post about the House GOP's communication problem and this article about  the recent news about ending the ban on offshore drilling which would encourage American energy independence This is a key issue to prevent money from going to hostile countries such as Iran  and Venezuela. For more that you can do to get involved click HERE and you can read a very interesting book HERE!


Defrauding the American Taxpayer - The Earned Income Tax Credit


EITC and Population Growth

Part 4 of 7

By Edwin S. Rubenstein

For The Social Contract

April, 2011

EITC originated as an income supplement for low income workers. Somewhere along the line its purpose seems to have changed. Today it is a program whose benefits are heavily contingent on parenthood.

EITC payments rise sharply as the number of children in the taxpayer’s household rises. In 2008 a family with no children received a maximum EITC payment of $438; a family with one child received up to $2,917, two or more children bumps the maxim credit to $4,824.

Children thus trigger an 11-fold increase in EITC payment.

That’s an irresistible windfall for low income workers, a big incentive to procreate – or at least claim to. The IRS estimates that roughly half of the incorrect filing claims under the EITC involve fraudulent child custodial claims. [“Earned Income Tax Credit: The Compliance Challenge,” Century Foundation Issue Brief.] Yet the tax collection agency does little to verify the existence of children claimed on tax returns.

But most children claimed on EITC tax returns are real – and therein lies the problem. The decision to have children may often be influenced, at least in part, by the generous tax credit.

The perverse child-bearing incentives are far more acute among immigrant households - as evidenced by their above average eligibility rates:

Table 6 EITC eligibility rates (%), 2007

All immigrants

31.1%

Immigrant households with children under 18

47.6%

All natives

17.8%

Native households with children under 18

32.4%

Data source: CIS, “Immigrants in the United States, 2007,” November

 http://www.thesocialcontract.com/

2007.Table 13.

Immigrant households with children under 18 are about 50% more likely to be eligible for EITC than similar households headed by natives. This reflects the lower average income of immigrant households with children.

While it is impossible to determine how many births are directly related to the EITC or similar pro-parenthood programs, circumstantial evidence that such a linkage exists is easily obtained. Since the introduction of EITC in the 1970s, for example, births to immigrant mothers have quadrupled:

228,486 in 1970 ( 6.1 percent of all births)

339,662 in 1980 (9.4 percent of all births)

621,442 in 1990 (14.9 percent of all births)

915,800 in 2002 (22.7 percent of all births)

In 1970 immigrant mothers accounted for about 6% of U.S. births. By 2002 their share rose to 22.7%. Even in 1910 - the peak of the Great Wave - only 21.9 percent of births were to foreign-born mothers. [http://www.cis.org/articles/2005/back805.html]

EITC and immigrant fertility

Three mega-trends explain the record shattering rise of immigrant births. First, and foremost, is simply the increase in the number of immigrants and their share of the overall population. Between 1970 and 2002 the foreign-born population of the U.S. increased from 9.6 million to 32.5 million – a 225% increase. Over the same period, however, the number of children born in the U.S. to immigrant mothers rose even faster:

Table 7

Births to Immigrant Mothers Rise

Faster than Immigrant Population

Births to Immigrant Mothers

Immigrant Population

Number

% of all Births

Number (mil.)

% of total population

1970

228,486

6.1%

9..7

4.7%

1980

339,662

9.4%

14.1

6.2%

1990

621,442

14.9%

19.8

7.9%

2002

915,800

22.7%

32.5

11.5%

% increase, 1970-2002

300.1%

225.1%

Data source: Steven Camarota, “Births to Immigrants in America, 1970 to


2002,”

Center for Immigration Studies, July 2005. Figure 2.

http://www.cis.org/articles/2005/back805.html

The second mega-trend is the change in the age distribution of the foreign-born and native-born populations. In 1970 the current wave of immigration had just begun; a significant fraction of foreign-born residents were older, pre-WWII arrivals, well past their primary reproductive years. Only 36% of female immigrants were 15 to 44 years of age, or much less than the 41% of natives, according to the 1970 Census. By 1980 the female groups had changed places: 46% of immigrant women were in the prime child bearing years versus 45% of native women. Since then the age distribution has tilted further in favor of young immigrant mothers. Specifically, the share of immigrant females in their child-bearing years increased from 53% in 1990 to 56% in 1992, while for natives it fell from 45% to 41%. [Data source: Steven Camarota, “Births to Immigrants in America, 1970 to 2002,” Center for Immigration Studies, July 2005. http://www.cis.org/articles/2005/back805.html ]

Third mega-trend – and the one most directly influenced by EITC – is the average number of children immigrant women will have during their prime reproductive years. This is best measured by what demographers call a Total Fertility Rate (TFR). TFR represents the expected number of children a woman will have over the course of her lifetime, based on current birth rate trends.

TFR comparisons are particularly useful when there are large age differences among groups. If, say, female immigrants are much younger than female natives, the TFRs of the two groups will not be affected. By contrast, birth rates – calculated as births per 100,000 population – will generally be larger in the group with the younger population.

Put differently, the TFR reflects the desire of women in various groups to have children. The prospect of a generous child benefit such as EITC can certainly affect that decision.

The relevant TFRs in 2002 were as follows:

Immigrant females: 2.86 children

Native-born females: 1.65 children http://www.cis.org/articles/2005/back805.html

On average, a foreign-born female will give birth to nearly three children during her lifetime versus less than two for a native-born female.

And if history is any guide, the immigrant/native fertility gap will remain intact in future generations. That is, fertility rates of the U.S.-born descendants of today’s immigrants will exceed by a similar margin those of the descendants of today’s natives.

[Note: A TFR of 2.1 is considered the “replacement” rate – i.e., the value at which a group can exactly replace itself over the course of a generation. If fertility stays below replacement for an extended period of time, population will eventually shrink. This is the prospect facing non-Hispanic whites in the years following 2030, as seen in Table 10.

Even small differences in fertility rates can produce enormous differences in population growth if they persist over a long period of time. They are the demographic equivalent of compound interest rates

In this way immigrants influence future population growth by more than their numbers might suggest. Over time the immigrants die, but their U.S.-born offspring will have children themselves, followed by grandchildren and subsequent generations. A sophisticated population projection methodology is required to measure the impact of future immigrants on future population growth.

The Pew Research Center published the best of these forecasts in 2008. http://pewhispanic.org/files/reports/85.pdf  Their main projections of the total, foreign-born, and native-born populations for the period to 2050 are as follows:

Table 8 U.S. Population: Total, Native-born,

and Foreign-born, 1960-2050

(population in thousands)

Total

Native-born

Population

Foreign-born

Population

Foreign-born

% of Total

1960

179,980

170,242

9,738

5.4%

1970

204,401

194,788

9,613

4.7%

1980

227,537

213,864

13,673

6.0%

1990

248,623

229,023

19,600

7.9%

2000

281,646

250,478

31,168

11.1%

2005

295,709

260,180

35,529

12.0%

Projections

2010

309,653

269,666

39,987

12.9%

2020

340,219

290,694

49,525

14.6%

2030

371,822

312,152

59,670

16.0%

2040

403,648

333,422

70,226

17.4%

2050

438,153

356,854

81,299

18.6%

Increase, 2005-2050

Persons

142,444

96,674

45,770

%

48.2%

37.2%

128.8%

Data source: Jeffrey Passel and D'Vera Cohen, "U.S. Population Projections: 2005-2050,"

Pew Hispanic Center, February 11, 2008. Table 2.

http://pewhispanic.org/files/reports/85.pdf

Total U.S. population is expected to increase by 142.4 million from 2005 to 2050, a 48% increase. The foreign-born population will increase by 45.8 million, more than


doubling its 2005 count, while the U.S.-born population will rise by 37% over the same 45-year period.

Based on these figures, the foreign born population will account for 32% of total population growth between 2005 to 2050 – 45.8 million of the total 142.4 million increase. But the Pew population model shows that if there had been no immigration after 2005, the foreign born population would have actually declined by approximately 21 million, as the pre-2005 immigrant cohorts die out. Thus the net contribution of new (post 2005) immigrants to population change over the 2005 to 2050 period is actually 67 million (45.8 million plus 21 million).

While the new immigrants themselves boost population growth by 67 million, their U.S.-born children are projected to add another 47 million and their grandchildren an additional 3. Summing it up, immigration will add 117 million (67 million plus 47 million plus 3 million) to U.S. population growth between 2005 and mid-century.

Bottom-line: Full 82% of U.S. population growth to mid-century will be due to immigrants arriving after 2005 and their descendants.

As things stand, immigration in on course to be the key driver of population growth in the coming half century. The Pew Research study assumes that current immigration policy remains unchanged. Future policy changes – tightened border security and rigorous enforcement of current immigration laws, for example – could substantially alter the projected totals.

Restructuring of the EITC to reduce the financial rewards to parenthood could have an equally strong impact on future population change.

EITC and immigrant fertility (continued)

The pro-child bearing incentives of EITC could also explain why immigrant fertility rates are higher in the U.S. than home countries:

Table 9 Is the EITC Responsible?:

Immigrant Fertility Rates Higher

in U.S. than in Home Country

Country of origin

TFR in Home Country

TFR in U.S.

Mexico

2.40

3.51

Philippines

3.22

2.30

China

1.70

2.26

India

3.07

2.23

Vietnam

2.32

1.70

Korea

1.23

1.57

Cuba

1.61

1.79


El Salvador

2.88

2.97

Canada

1.51

1.86

United Kingdom

1.66

2.84

Total Fertility Rate (TFR) is the number of children a woman can be expected to have in her reproductive years. Estimates are based on analysis of 2002 American Community Survey data. Data source: Steven Camarota, “Birth Rates Among Immigrants in America,” Center for Immigration Studies, October 2005. Table 1. http://www.cis.org/articles/2005/back1105.pdf

Immigrant mothers from most countries have more children in the U.S. than in their home country. Throughout the world, a woman’s educational level is a key determinant of her fertility, with more educated women generally having fewer children than the less educated. Yet even after controlling for education differences, immigrant fertility is higher here than the home country.

Clearly, something happens here that does not happen there. The availability EITC and other pro-child public benefits to low income, poorly educated immigrants, is surely one factor.

EITC and illegal aliens

EITC may well be the most illegal-immigrant-friendly of all welfare programs. Nearly 40% of households headed by illegals from Mexico are eligible for EITC, versus 26% of all immigrant households and 13% of households headed by U.S. natives. http://www.cis.org/articles/2001/mexico/mexico.pdf

If EITC’s pro-parenthood incentives are as powerful as we think, TFRs should be significantly higher for illegals than the other groups. Drum roll, please: fertility rates for illegal alien females is estimated at 3.06 children, compared to 2.61 children for legal immigrants, and 1.65 for natives. http://www.cis.org/articles/2005/back1105.pdf

Births to illegal alien mothers – aka “anchor babies” - accounted for a whopping 42 percent of all immigrant births in 2002. That may sound high until you consider that illegals account for at least one-quarter of foreign-born females are in the prime child-bearing years, 18 to 39. http://www.cis.org/articles/2005/back805.pdf

The illegal alien baby boom is also linked to the Constitutional accident known as the 14th Amendment, which confers citizenship on anyone born in the U.S. – no matter what the legal status of the parents. Many Mexican mothers-to-be have their babies in U.S.-border hospitals for one reason: to give birth to a U.S. citizen.

EITC is anti-marriage

Race, ethnicity, and the EITC

Minorities qualify for the EITC at higher rates than whites because their incomes are lower. Their average credit payment is also larger due to the presence of children. The latter difference is especially pronounced for Hispanic households. The Hispanic TFR in 2005 was 2.5 children per woman. This value is higher than for any of the race groups; white and Asian TFRs are about 1.8 and the black TFR is about 2.2. The higher rate for Hispanic women is, in large part, due to the relatively high fertility of Hispanic immigrants who have a TFR of about 2.8. http://pewhispanic.org/files/reports/85.pdf

Although fertility rates overall are expected to decrease by 2050, Hispanic, black, and Asian TFRs will remain above the white TFR. The inevitable result: minorities will displace Whites as the majority population group. The tipping point is a little more than a generation away, according to Census Bureau projections released in 2008:

Table 10 The Coming White Minority: Projected Population

by Race and Hispanic Origin, 2010-2050

Total

White, non-Hispanic

Hispanic

Black, non-Hispanic

Asian, non-Hispanic

Other

Population in thousands:

2010

310,233

200,853

49,726

37,985

14,083

7,586

2025

357,452

206,662

75,772

43,703

20,591

10,724

2030

373,504

207,217

85,931

45,461

22,991

11,904

2040

405,655

206,065

108,223

48,780

28,064

14,523

2045

422,059

204,772

120,231

50,380

30,704

15,972

2050

439,010

203,347

132,792

51,949

33,418

17,504

Percent of total:

2010

100.0%

64.7%

16.0%

12.2%

4.5%

2.4%

2025

100.0%

57.8%

21.2%

12.2%

5.8%

3.0%

2030

100.0%

55.5%

23.0%

12.2%

6.2%

3.2%

2040

100.0%

50.8%

26.7%

12.0%

6.9%

3.6%

2045

100.0%

48.5%

28.5%

11.9%

7.3%

3.8%

2050

100.0%

46.3%

30.2%

11.8%

7.6%

4.0%

Data source: Census Bureau, National Population Projections, August 2008.

http://www.census.gov/population/www/projections/summarytables.html

A decade ago, census demographers estimated that the nation’s population, which topped 300 million in 2006, would not surpass 400 million until sometime after mid-century. Now, they are projecting that the population will top 400 million in 2039 and reach 439 million in 2050.

Whites were an 87% majority in 1950. Today (2008) they account for 64% of the population. The census calculates that around 2030 the non-Hispanic white population will start to decline. By 2042 non-Hispanic whites will be in the minority – outnumbered by individuals who identify themselves as Hispanic, black, Asian, American Indian, Native Hawaiian and Pacific Islander .

Four years ago, Census officials projected the white minority would come in 2050.

By 2050 the number of Hispanic people will nearly triple, to 133 million from 47 million in 2008, to account for 30 percent of Americans, compared with 15 percent today.

People who say they are Asian, with their ranks soaring to 39 million from 16 million, will make up nearly 9 percent of the population, up from 5 percent.

The main reason for the accelerating change is significantly higher fertility rates among immigrants. Indeed, the U.S.-born children of Hispanic immigrants are replacing their parents as the fastest-growing segment of the Latino population. The children will likely surpass their parents in earnings and education, but will not close the gap with white, non-Hispanics.

A mother’s culture, education, and earnings potential are probably more important than the prospect of higher EITC payments when she decides to have another child. But the credit surely is a factor for some. Even a tiny change in average fertility rates, when compounded over time, will have enormous consequences.

The role of the EITC in America’s demographic transition cannot be denied

EITC: Pro-child, but anti-marriage

EITC payments ramp up dramatically when children are born. But married parents often receive a far smaller benefit than single or co-habiting parents with similar incomes. The marriage penalty occurs when the combined earnings of husband and wife push them into EITC’s “phase-out” range - currently from $15,752 to $38,646. Every additional dollar of income within that range reduces EITC payments by 21 cents.


If a childless full-time minimum wage worker marries a minimum wage worker with two children, they suffer an EITC marriage penalty of nearly $2,000 compared to what they could have if they remained single. If they each have two children, they stand to lose nearly $6,000 in EITC payments upon tying the knot.

In 1979 73% of children lived in married couple households; by 2003 only 62% did. Obviously cultural and demographic factor play into this trend. But the fraction of children living with married parents declines most dramatically during economic downturns - exactly when EITC eligibility is on the rise. http://www3.interscience.wiley.com/journal/118634498/abstract

The financial benefits of EITC could well be offset by its perverse impact on child living arrangements.