Design
Phase-in, plateau and phase-out ranges (Hotz & Scholz, 2003); unlike basic income or a negative income tax, it requires work.
Work incentives
Eissa and Liebman (1996) and Meyer and Rosenbaum (2001) found rising employment among single mothers; Chetty et al. (2013) show knowledge matters.
Poverty and limits
Hoynes and Patel (2018) find large poverty reduction; Evans and Garthwaite (2014) health gains. Nichols and Rothstein (2016) note jobless families miss out; a workfare-style tool against working poverty.
FAQ
- What is it in simple terms?
- Low-paid workers get extra money back from the government based on what they earn.
- Can non-workers get it?
- No; it requires earnings, so the poorest jobless households miss out.
Sources reviewed: 2026-10-26
References
- Eissa, N., & Liebman, J. B. (1996). Labor supply response to the earned income tax credit. Quarterly Journal of Economics, 111(2), 605–637. The classic study showing single mothers' employment rose after an expansion.
- Meyer, B. D., & Rosenbaum, D. T. (2001). Welfare, the earned income tax credit, and the labor supply of single mothers. Quarterly Journal of Economics, 116(3), 1063–1114. Decomposes the 1990s rise in single mothers' work, attributing much to the EITC.
- Hotz, V. J., & Scholz, J. K. (2003). The earned income tax credit. In R. A. Moffitt (Ed.), Means-tested transfer programs in the United States (pp. 141–198). University of Chicago Press. A comprehensive chapter on design (phase-in, plateau, phase-out) and evidence.
- Chetty, R., Friedman, J. N., & Saez, E. (2013). Using differences in knowledge across neighborhoods to uncover the impacts of the EITC on earnings. American Economic Review, 103(7), 2683–2721. Uses neighbourhood knowledge differences to estimate earnings responses.
- Evans, W. N., & Garthwaite, C. L. (2014). Giving mom a break: The impact of higher EITC payments on maternal health. American Economic Journal: Economic Policy, 6(2), 258–290. Finds higher payments improved mothers' mental health.
- Hoynes, H. W., & Patel, A. J. (2018). Effective policy for reducing poverty and inequality? The earned income tax credit and the distribution of income. Journal of Human Resources, 53(4), 859–890. Estimates poverty reduction including employment responses.
- Nichols, A., & Rothstein, J. (2016). The earned income tax credit. In R. A. Moffitt (Ed.), Economics of means-tested transfer programs in the United States (Vol. 1, pp. 137–218). University of Chicago Press. An updated survey including error rates and marriage penalties.