Why Should America Support the Earned Income Tax Credit?

Abstract

The purpose of this paper is first and foremost to bring more attention to the Earned Income Tax Credit and to respond to growing arguments against it. First, I will explain the arguments and attacks. Then, I will explain why any tax expenditure (whether benefiting low-income or high-income families) should be seen as a form of social spending; I will also defend the refundable portion of the EITC. Finally, I will answer the broad question: “Is the EITC an effective program?” In the end, I will show that the EITC is successful at lowering marginal tax rates and increasing labor supply. Just as importantly, I will also show that the Earned Income Tax Credit is one of the most effective anti-poverty programs in the United States today; as a result, it should be both supported and expanded. [From Introduction]