We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
The Earned Income Tax Credit: Targeting the poor but crowding out wealth.
- Authors
Froemel, Maren; Gottlieb, Charles
- Abstract
This paper quantifies the individual, aggregate and welfare effects of the US Earned Income Tax Credit (EITC). In particular, we analyze the labour supply and saving responses to changes in tax credit generosity and their implications for prices and welfare. Our results show that the EITC is a subsidy on labour income and a tax on savings. An increase in EITC generosity raises labour force participation, reduces savings for many and provides insurance to working poor households. The EITC reduces earnings inequality but increases the skill premium and wealth inequality. A 10% increase in tax credit generosity increases welfare by 0.31% and benefits the majority of the population.
- Subjects
TAX credits; EARNED income tax credit; TAX planning; INCOME inequality; INCOME tax; LABOR supply
- Publication
Canadian Journal of Economics, 2021, Vol 54, Issue 1, p193
- ISSN
0008-4085
- Publication type
Article
- DOI
10.1111/caje.12492