The Effects of the EITC and Recent Reform
In this paper, I first summarize how the U.S. Earned Income Tax Credit (EITC) operates and describe the characteristics of recipients. I then discuss empirical work on the effects on hours of work and marriage, and problems of compliance with the tax system. I then simulate the effects of the recent expansion of the credit for families with three or more children that were part of the American Recovery and Reinvestment Act of 2009. I also reexamine the key assumptions of past work on the labor supply effects of the EITC. Finally, I briefly discuss the likely effects of further expanding the credit to non-custodial parent, as has been recently done in two jurisdictions.
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