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The earned income tax credit: Participation, compliance, and antipoverty effectiveness

  • J. K. Scholz

This paper examines the participation rate of the earned income tax credit (EITC). After examining a variety of data sources on EITC recipiency, my preferred estimates indicate that 80 to 86 percent of eligible taxpayers received the credit in 1990, which implies fewer than 2.1 million taxpayers entitled to the credit failed to receive it. I then examine factors correlated with nonparticipation and find that many are consistent with rational or voluntary explanations for nonparticipation. The paper concludes with a discussion of the labor market incentives and antipoverty effectiveness of the credit before and after the August 1993 expansion of the EITC.

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Paper provided by University of Wisconsin Institute for Research on Poverty in its series Institute for Research on Poverty Discussion Papers with number 1020-93.

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Handle: RePEc:wop:wispod:1020-93
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  1. Howard Chernick & Andrew Reschovsky, 1990. "The Taxation of the Poor," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 712-735.
  2. Saul D. Hoffman & Laurence S. Seidman, 1990. "The Earned Income Tax Credit," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number eitc, April.
  3. Rebecca M. Blank & Patricia Ruggles, 1993. "When Do Women Use AFDC & Food Stamps? The Dynamics of Eligibility vs. Participation," NBER Working Papers 4429, National Bureau of Economic Research, Inc.
  4. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
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