TodayEITCEmpirical work, Eissa and Liebman (1996, QJE)NextTheory of labor demandEmpirical work, Card and Krueger (1994, AER)2
Earned Income Tax CreditWelfare programs create work disincentivesAn alternative approach to improving the economic status of low-income persons is EITCBegan in 1975 and has been expanded since thenConsider a household with a working mother and two kids. In 2005She can claim a tax credit of up to 40% of earnings if she earns less than $11,000 a yearThe maximum credit of $4,400 is available if her salary is not above $14,370Beyond that, each additional dollar earned reduces the credit by 21.06 centsThe credit completely disappears at $35,2633
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