31 Pages Posted: 10 Jan 2008
In this article, the authors examine the present administrative system for the earned income tax credit (EITC) especially the refinements resulting from enactment of the Omnibus Budget Reconciliation Act of 1990 (OBRA). After describing the problems created by the complexities of the new EITC, the authors conclude that the present system is not working well. They propose that Congress reform the law so that the credit can be used to reduce an employee's liability for Social Security taxes, and refund any excess credit through an addition to take-home pay. The authors believe that the proposed EITC could be administered through employers' payroll systems, thus eliminating the necessity of filing tax returns for many taxpayers who otherwise would not be required to file. They conclude that another benefit may result from this proposal: The impetus and staging for a system that would ultimately transfer the responsibility for income tax collection and refunds for many individuals with uncomplicated incomes from the taxpayer to more impartial providers of the income, i.e., employers, banks, etc. Congress could eliminate the filing requirement for many taxpayers who have no income other than wages.
Keywords: earned income tax credit, working poor, low-income taxpayers
JEL Classification: H24, I31, J18, K34, J58, J38
Suggested Citation: Suggested Citation
Lipman, Francine J. and Williamson, James E., The New Earned Income Tax Credit: Too Complex for the Targeted Taxpayers?. Tax Notes, Vol. 57, No. 789, 1992. Available at SSRN: https://ssrn.com/abstract=1082145