Redistribution and Tax Expenditures: The Earned Income Tax Credit

Nada Eissa and Hilary Williamson Hoynes

No 14307, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: H2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab and nep-pub
Date: 2008-09
Note: PE
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Chapter: Redistribution and Tax Expenditures: The Earned Income Tax Credit (2008)
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