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Making work pay better through an expanded earned income tax credit

Hilary Hoynes, Jesse Rothstein, and Krista Ruffini
Editor's Note:

This is a chapter from The 51%: Driving growth through women’s economic participation, edited by Diane Whitmore Schanzenbach and Ryan Nunn.

Abstract

The Earned Income Tax Credit (EITC) is a refundable tax credit that promotes work. Research has shown that it also reduces poverty and improves health and education outcomes. The maximum credit for families with two or fewer children has remained flat in inflation-adjusted terms since 1996. Over the same period, earnings prospects have stagnated or diminished for many Americans, and prime-age employment rates have fallen. This paper proposes to build on the successes of the EITC with a ten percent across-the-board increase in the federal credit. This expansion would provide a meaningful offset to stagnating real wages, encourage more people to enter employment, lift approximately 600,000 individuals out of poverty, and improve health and education outcomes for millions of children.

 


Hilary Hoynes is an Advisory Board Member of the Laura and John Arnold Foundation, which has funded her research on the long-run effects of the food stamp program, an Advisory Board Member for the Stanford Institute for Economic Policy Research, a member of the Board of Directors of the California Budget and Policy Center, a member of the Federal Commission for Evidence-Based Policymaking. With the exception of the aforementioned, the authors did not receive financial support from any firm or person for this paper or from any firm or person with a financial or political interest in this paper. With the exception of the aforementioned, they are currently not officers, directors, or board members of any organization with an interest in this paper. 

Authors

Hilary Hoynes

Professor of Public Policy and Economics, Haas Distinguished Chair in Economic Disparities - University of California, Berkeley

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