Full Citation
Title: Navigating the Earned Income Tax Credit
Citation Type: Working Paper
Publication Year: 2017
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Abstract: The earned income tax credit (EITC) is the federal government’s largest meanstested cash assistance program. In 2014 the program provided over $69 billion in tax credits and tax spending in the form of reduced tax liabilities. These benefits were distributed to 25.8 million tax filers for an average of about $2,400. The EITC rewards work by providing tax credits to lower earning workers that initially increase as workers earn more. Over an initial range of earnings, the tax credits effectively raise workers’ wage rates. After the initial range of earnings with increasing tax credit amounts, there is then a range of earnings over which the tax credits are constant. As workers earn above this range, the tax credits gradually fall, such that above a given threshold the tax credit is zero. The credits also vary by family size and given the family size the credits have become more generous over time. The maximum credits and the range for EITCeligible income have been legislatively increased since the EITC was introduced in 1975. Consistent with other studies, we find that among women with some college or less education, participation in the labor market by single women with children has increased in response to expansions in the EITC program. Hours of work and annual earnings for this group have not increased relative to other single women with no children in the household, however. In general, earnings inequality among women with some college or less education has risen as has the share attributable to single women with children. Finally, evidence on how the EITC helps boost workers’ future earnings is mixed.
Url: http://perc.tamu.edu/perc/Publication/policybrief/study_no1703_08_2017.pdf
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Authors: Liu, Liqun; Rettenmaier, Andrew, J
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Publication Number: 1703
Institution: Private Enterprise Research Center
Pages: 19
Publisher Location: College Station, TX
Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure, Other
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