Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2008:14: The US earned income tax credit, its effects, and possible reforms

Bruce D. Meyer ()
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Bruce D. Meyer: Harris School of Public Policy Studies, University of Chicago, Postal: 1155 E. 60th Street, Chicago, IL 60637, USA

Abstract: In this paper, I first summarize how the US Earned Income Tax Credit (EITC) operates and describe the characteristics of recipients. I then discuss empirical work on the effects of the EITC on poverty and income distribution, and its effects on labor supply. Next, I discuss a few policy concerns about the EITC: possible negative effects on hours of work and marriage, and problems of compliance with the tax system. I then briefly discuss some possible reforms to the structure of the current EITC.

Keywords: Welfare reform; Earned income tax credit; EITC; Earnings subsidies; Tax credits; Poverty

JEL-codes: D31; H24; I38; J38

30 pages, May 17, 2008

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