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The Earned Income Tax Credit

The Earned Income Tax Credit

Chapter:
(p.141) 3 The Earned Income Tax Credit
Source:
Means-Tested Transfer Programs in the United States
Author(s):
V. Joseph HotzJohn Karl Scholz
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226533575.003.0004

The Earned Income Tax Credit (EITC) has been one of the fastest-growing means-tested programs in the country. It provides a refundable tax credit to families with earnings that can be as high as $3,800 a year (1999). This chapter is organized as follows. Section 3.2 reviews the political history of the EITC, its rules, and its goals, and provides a broad set of program statistics that summarize its growth and coverage. Section 3.3 provides EITC program statistics. Section 3.4 outlines the conceptual underpinnings of much of this recent work and discusses EITC participation and compliance, its effects on labor force participation and hours of work, marriage and fertility, skill formation, and consumption. Section 3.5 reviews the evidence to date on these behavioral issues. The final sections briefly discuss EITC-related policy debates; highlight what, if any, critical economic issues underlie these debates; and identify issues on which future research is needed.

Keywords:   means-tested programs, refundable tax credits, program statistics, EITC, labor participation, compliance, marriage, fertility, skill formation, consumption

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