Since its inception in the 1970s, the federal Earned Income Tax Credit (EITC) has enjoyed wide bipartisan support. Designed to encourage and reward work, a low-wage worker’s EITC grows with each additional dollar of earnings until his or her wages reach a maximum value — an incentive for people to leave welfare for work and for low-wage employees to increase their work hours.
And the EITC is refundable: If the amount of the credit exceeds what the worker owes, he or she gets a refund.
“For conservatives, the EITC is pro-work, it is pro-personal responsibility. Liberals like that too, but also it is directed toward low-income people, so you get that mix,” says Chuck Marr, director of federal tax policy for the Center on Budget and Policy Priorities. “Plus, it works. There is very rigorous research to show that it encourages more work.”
According to the IRS, the 42-year-old Earned Income Tax Credit is one of the nation’s largest anti-poverty programs. In tax year 2015, for example:
More than 27 million filers received about $67 billion in earned income tax credits.
Four of five people eligible for the EITC claimed it.
The EITC and the separate Child Tax Credit lifted an estimated 9.4 million people out of poverty, including 5 million children.
In the 11-state Midwest, more than 4.6 million federal EITC claims for tax year 2015 provided almost $11.2 billion in credits. The average refund was $2,343. (The maximum federal credit in 2016 ranged from $506 for a childless individual to $6,269 for a family with three or more children.)