Working Paper: NBER ID: w14307
Authors: Nada Eissa; Hilary Hoynes
Abstract: This paper examines the distributional and behavioral effects of the Earned Income Tax Credit (EITC). We chart the growth of the program over time, and argue several expansions show that real responses to taxes are important. We use tax data to show the distribution of benefits by income and family size, and examine the impacts of hypothetical reforms (expansions and contractions) to the credit. Finally, we calculate the efficiency effects of marginal changes to EITC parameters. Targeting the EITC to lower-income families by raising the phase-out rate generates a welfare loss for single mothers, primarily because of the disincentive to enter the labor market and not the traditional hours-of-work distortion.
Keywords: No keywords provided
JEL Codes: H2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EITC (H26) | Labor market participation incentives (J68) |
| EITC phaseout (H31) | Reduced hours worked (J22) |
| EITC (H26) | Employment rates among eligible women with children (J21) |
| EITC (H26) | Poverty reduction (I32) |