Minimum Wage, the Earned Income Tax Credit, and Inflation

Research Report

Minimum Wage, the Earned Income Tax Credit, and Inflation

December 5, 2005

Abstract

The earned income tax credit was enacted to offset the social security payroll tax for low-income working families. The credit has been significantly expanded and now provides substantial income to these families. However, very low-income workers, such as those working at the minimum wage, have seen the value of their credit erode due to interaction between the earned income tax credit, the minimum wage, and inflation.

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