Recent Proposals to Redesign the EITC: A Reply to an Economist's Response

Abstract

In this article, the authors reply to Professor Robert Moore's economic analysis of several proposals to redesign the earned income tax credit (EITC). (See Tax Notes, July 5, 1993, p. 105.) Moore suggested that the proposed design changes could result in severe work disincentives. Using the new expanded EITC in their examples, the authors demonstrate that the targeted taxpayers, because of lack of information and choice in the workplace, may not react to the EITC in the way economic models predict.

Keywords: working poor, earned income tax credit, work incentives, work disincentives

JEL Classification: A13, D63, D10, H23, H24, H31, I31, I38, I32, J18