A Universal EITC: Sharing the Gains from Economic Growth, Encouraging Work, and Supporting Families

Research Report

A Universal EITC: Sharing the Gains from Economic Growth, Encouraging Work, and Supporting Families

May 20, 2019

Abstract

This report analyzes a straightforward mechanism to mitigate middle-class wage stagnation: a wage tax credit of 100 percent of earnings up to a maximum credit of $10,000, called a universal earned income tax credit. The child tax credit would increase from $2,000 to $2,500 and be made fully refundable. A broad-based, value-added tax of 11 percent would finance the new credit. The proposal is highly progressive and would nearly end poverty for families headed by a full-time worker. This report compares the proposal with current law, analyzes its economic effects, compares it to alternative reform options, and considers some complementary policy options.

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