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

Diane Whitmore Schanzenbach, Michael R. Strain

Chapter in NBER book Tax Policy and the Economy, Volume 35 (2020), Robert A. Moffitt, editor (p. 87 - 129)
Conference held September 24, 2020
Published in June 2021 by University of Chicago Press
in The Tax Policy and the Economy Series

The Earned Income Tax Credit (EITC) is the cornerstone U.S. anti-poverty program for families with children, typically lifting millions of children out of poverty each year. Targeted to low-income households with children, and only available to those who work, the EITC contains strong incentives for non-workers to become employed. Most of the existing economics literature focuses on federal EITC expansions in the 1980s and 1990s. This paper takes a longer view, studying all federal expansions since the program’s inception in 1975. We find robust evidence that EITC expansions increase the extensive margin of labor supply.

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Acknowledgments

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Document Object Identifier (DOI): 10.1086/713494