November 2020 | Diane Whitmore Schanzenback, Michael R. Strain, National Bureau of Economic Research

Employment Effects of the Earned Income Tax Credit: Taking the Long View

The Earned Income Tax Credit (EITC) is tax credit meant to lift families out of poverty. It provides a tax credit to workers based on earnings and household size. Since its inception in 1975, it has been expanded five times. This paper examines each individual expansion in depth and studies the expansions as a group to determine the effect of the EITC on labor supply. The conclusions include evidence that the EITC increased employment among unmarried mothers and raises their annual incomes.

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