Chapter

The Earned Income Tax Credit

V. Joseph Hotz and John Karl Scholz

in Means-Tested Transfer Programs in the United States

Published by University of Chicago Press

Published in print October 2003 | ISBN: 9780226533568
Published online February 2013 | e-ISBN: 9780226533575 | DOI: http://dx.doi.org/10.7208/chicago/9780226533575.003.0004
The Earned Income Tax Credit

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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

Chapter.  25612 words.  Illustrated.

Subjects: Public Economics

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