Redistribution and Tax Expenditures: The Earned Income Tax Credit

54 Pages Posted: 8 Sep 2008 Last revised: 4 Feb 2021

See all articles by Nada Eissa

Nada Eissa

Georgetown University; National Bureau of Economic Research (NBER)

Hilary Williamson Hoynes

University of California, Berkeley; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: September 2008

Abstract

This paper examines the distributional and behavioral effects of the Earned Income Tax Credit (EITC). We chart the growth of the program over time, and argue several expansions show that real responses to taxes are important. We use tax data to show the distribution of benefits by income and family size, and examine the impacts of hypothetical reforms (expansions and contractions) to the credit. Finally, we calculate the efficiency effects of marginal changes to EITC parameters. Targeting the EITC to lower-income families by raising the phase-out rate generates a welfare loss for single mothers, primarily because of the disincentive to enter the labor market and not the traditional hours-of-work distortion.

Suggested Citation

Eissa, Nada O. and Hoynes, Hilary Williamson, Redistribution and Tax Expenditures: The Earned Income Tax Credit (September 2008). NBER Working Paper No. w14307, Available at SSRN: https://ssrn.com/abstract=1264569

Nada O. Eissa (Contact Author)

Georgetown University ( email )

Washington, DC 20057
United States

National Bureau of Economic Research (NBER)

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Hilary Williamson Hoynes

University of California, Berkeley ( email )

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Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

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Germany

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