The Earned Income Tax Credit (EITC): An Overview (CRS Report for Congress)
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| Release Date |
Revised Oct. 22, 2014 |
| Report Number |
RL31768 |
| Report Type |
Report |
| Authors |
Christine Scott, Specialist in Social Policy; Margot L. Crandall-Hollick, Analyst in Public Finance |
| Source Agency |
Congressional Research Service |
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Summary:
âThe Earned Income Tax Credit (EITC or EIC) began in 1975 as a temporary program to return a portion of the Social Security tax paid by lower-income taxpayers (the credit was, and remains, calculated as a percentage of earned income, with no direct link to Social Security taxes paid by the tax filer), and was made permanent in 1978. In the 1990s, the program became a major component of federal efforts to reduce poverty, and is now the largest anti-poverty cash entitlement program. Childless adults in 2011 (the latest year for which data are available) received an average EITC of $264, families with one child received an average EITC of $2,199, families with two children received an average EITC of $3,469, and families with three or more children received an average EITC of $3,750. A low-income worker must file an annual income tax return to receive the EITC and meet certain requirements for income and age. A tax filer cannot be a dependent of another tax filer and must be a resident of the United States unless overseas because of military duty. The EITC is based on income and whether the tax filer has a qualifying child. [â¦] Policy issues for the EITC, which reflect either the structure, impact, or administration of the credit, include the work incentive effects of the credit; the marriage penalty for couples filing joint tax returns; the anti-poverty effectiveness of the credit; and compliance. Anti-poverty effectiveness concerns have led to the introduction of legislation and the recent Obama Administration proposal for expanding the EITC for childless adults.â
