The Future of the Earned Income Tax Credit (Part 2 of 3)

Research Report

The Future of the Earned Income Tax Credit (Part 2 of 3)

Part Two: Distortions and Compliance Problems
June 26, 1995

Abstract

Senior Fellow Eugene Steuerle examines principal sources of concern about the Earned Income Tax Credit (EITC) regarding the credit's impact on work effort and the extent of noncompliance. His conclusions: (1) All transfers and taxes distort some choices, and the EITC is no exception. The EITC can be best assessed against alternatives that attempt to help low-income households and workers, not as a stand-alone provision. (2) As currently designed, the EITC cannot be fully enforced by the IRS and, to deter abuse, must either be supplemented by further restrictions or be restructured.

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