Week 2: Tax Evaluation Criteria, Tax Incidence and the Revenue Side of Budgeting

An Overhyped Tax Credit

This editorial is an interesting examination of the Earned Income Tax Credit, which is supported by both parties as a boost to employment benefits. A credit can be viewed as preferable to raising the minimum wage because it does not reduce the incentive to hire low-skilled workers. The article points out that there has been $69 billion worth of “improper” EITC credits issued and that government payments towards the credit is now greater than payments to welfare. Increases in the EITC have correlated with increases in employment but this new study argues that the results can be attributed to reduction in welfare and other such reforms rather than the EITC. EITC is useful to redistribute wealth but the article argues it should not be considered an incentive to work. As a reader, I want to know more on this topic.