The United States federal Earned Income Tax Credit (EITC) is a refundable tax credit that reduces or eliminates the taxes that low-income working people pay (such as payroll taxes) and also frequently operates as a wage subsidy for low-income workers. Enacted in 1975, the then very small EITC was expanded in 1986, 1990, 1993, and 2001 with each major tax bill, regardless of whether the tax bill in general raised taxes (1990), lowered taxes (2001), or eliminated other deductions and credits (1986). Today, the EITC is one of the largest anti-poverty tools in the United States, and enjoys broad bipartisan support.

Other countries with EITCs include Britain, Canada, Ireland, New Zealand, Finland, Belgium, France, the Netherlands and Denmark. In some cases, these are small (the maximum EITC in Finland is 290 Euros), but others are even larger than the US EITC (the UK EITC is worth up to 6150 Euros).

Structure

---

The EITC in the United States is characterized by a unique three-stage structure that consists of a phase-in range in which the credit increases as earnings increase, a plateau range in which the maximum credit has been reached and further earnings do not affect it, and a phase-out range in which the credit decreases as earnings increase. Currently, for a family with two dependent children, the credit is equal to 40 percent of the first $10,750 earned, plateaus at a maximum credit of $4,400, begins to phase-out when earnings increase beyond approximately $15,000, and reaches zero when earnings pass approximately $35,000. For filers using the Married Filing Jointly status, the phase-out thresholds are increased by $2000. For a family with one dependent child, the structure is similar but has a phase-in rate of 34 percent and a maximum credit of $2,604. For those filing without dependents, there is a small credit of 7.65 percent of earnings with a maximum of $380, which covers the employee's portion of the social security and medicare payroll taxes. All dollar amounts are now indexed to inflation.

More on [ Earned income tax credit ]

NPR Topics: Politics & Society

Looking Back on Jesse Helms' Life
Fri, 04 Jul 2008 18:14:00 -0400
Sen. No, as he was often called, "was a real throwback," says Merle Black, a professor of southern politics at Emory University. One of a select group of politicians who helped solidify Republican control in the South, he had a loyal constituency of working-class whites in North Carolina.
Financial Aid Woes Make Community College More Appealing
Fri, 04 Jul 2008 16:05:00 -0400
Despite efforts by the Bush Administration and Congress to quell turmoil in the student loan market, some students are still struggling to find money for college. We examine the case of two recent high school graduates who have been promised financial aid, but don't know how much they can count on.
When Did Flag Pins Become So Important?
Fri, 04 Jul 2008 16:00:00 -0400
Sen. Barack Obama Obama was questioned about why he doesn't always wear a flag pin during a Democratic debate in April. His critics say his lack of pin casts doubt on Obama's patriotism, and recently the Democratic candidate has been wearing one.

The Talk of the Town

The Chill
Nick Paumgarten Mon, 30 Jun 2008 04:00:00 -0000
If you had stumbled into Banjo Jim’s, in the East Village, on a recent Wednesday night and encountered a sixty-something guy leading a band through a fervent rendition of “Wild Thing,” for an audience of two dozen or so, you might have concluded, “This is lame,” and slipped back . . .
Oily Speculations
James Surowiecki Mon, 30 Jun 2008 04:00:00 -0000
When bad things happen, it’s always nice to have a scapegoat. So, with Americans furious about soaring oil prices, Congress has gone in search of someone to blame. There are a number of usual suspects to choose from, depending on your politics--OPEC, greedy oil companies, lily-livered environmentalists opposed . . .
Obama’s Iraq Problem
George Packer Mon, 30 Jun 2008 04:00:00 -0000
In February, 2007, when Barack Obama declared that he was running for President, violence in Iraq had reached apocalyptic levels, and he based his candidacy, in part, on a bold promise to begin a rapid withdrawal of American forces upon taking office. At the time, this pledge represented conventional thinking . . .

Subscribe to Society RSS feed