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The US earned income tax credit, its effects, and possible reforms

Abstract

In this paper, I first summarize how the US Earned Income Tax Credit (EITC) operates and describe the characteristics of recipients. I then discuss empirical work on the effects of the EITC on poverty and income distribution, and its effects on labor supply. Next, I discuss a few policy concerns about the EITC: possible negative effects on hours of work and marriage, and problems of compliance with the tax system. I then briefly discuss some possible reforms to the structure of the current EITC.Welfare reform; Earned income tax credit; EITC; Earnings subsidies; Tax credits; Poverty

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