Noncustodial Parents, Child Support, and the Earned Income Tax Credit

As welfare reform moves families from reliance on welfare to reliance on work, child support and the Earned Income Tax Credit (EITC) play an increasingly important role in the financial well-being of low-income single parent families with children. The first section of this paper examines the effect of child support, the EITC, and the tax system on the relative well-being of low-income noncustodial parents and custodial families. The authors find that a low-income noncustodial parent must have earnings 50 to 100 percent higher than the custodial parent in order to pay child support and taxes and enjoy the same standard of living as the custodial family. Noncustodial parents receive little of the tax relief available to families with children, and typical state child support guidelines do little to redress this. The authors explore three options for expanding the EITC to greater assist low-income noncustodial parents who pay child support, and discuss two options for partially or fully funding this expansion.