3/17/2023 0 Comments Forms to go with eitcWhile its goals of encouraging work and reducing poverty might be straightforward in principle, the EITC is a sophisticated program with several parts to its calculation. Promoting sound tax policy requires acknowledging both the EITC’s benefits and its drawbacks. When evaluating proposals to reform or further expand the EITC-for example, Senator Sherrod Brown (D-OH), Representative Bonnie Watson Coleman (D-NJ), and Representative Ro Khanna’s (D-CA) “ Cost-of-Living Refund Act” and Senator Kamala Harris’ (D-CA) “ LIFT the Middle-Class Act”-policymakers should keep in mind the EITC’s trade-offs. It also imposes a marriage penalty, reducing the credit’s value for married workers, and creates disparity between workers with and without children. At the same time, the EITC is complicated, has a consistently high error rate, and creates a disincentive to work once recipients reach a certain income level. There is also strong evidence that it encourages workforce participation, at least among particular demographics. The EITC is a well-targeted anti-poverty program that counteracts instances of regressivity in the tax code. It has two main purposes-to promote work and to reduce poverty-and is only available to those who are employed, in contrast to some anti-poverty programs.Īs the EITC has expanded, it has become more important to understand its impact and to recognize its strengths and weaknesses. Since it was enacted in 1975, the EITC has undergone several reforms and expansions, becoming a major tax expenditure and anti-poverty policy in the United States. The Earned Income Tax Credit (EITC) is used to offset income and payroll taxes for low-income workers. Policymakers should consider the EITC’s trade-offs when evaluating proposals to expand or reform the credit.
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