NCPA - National Center for Policy Analysis

Should Congress Expand the Childless Worker Earned Income Tax?

June 5, 2015

Expanding the childless worker earned income tax credit (EITC) has received a great deal of attention in the past several years. Supporters believe it will increase labor force participation and employment, as well as reduce poverty among key demographic groups. There are many ways in which an expansion could be designed.

Some key points to consider:

  • Proposals for an EITC expansion for childless workers vary in terms of the size of the credit, the earnings limits for eligibility and eligibility exclusions.
  • An expansion of the EITC for childless workers could reach 8-14 million workers and cost $5-8 billion in new spending, depending on whether students are excluded and work requirements are adopted. A more generous option could reach 21 million workers but would require as much as $22 billion in new spending.
  • Young people (ages 21-24) are the primary beneficiaries of proposed expansions, as are men, who would receive approximately 55-60 percent of benefits from any expansion. Women, older workers and married couples also benefit, but to a lesser extent.
  • Student exclusions and work requirements would lower costs but may be difficult to administer.

When thinking about the proper amount and reach of a childless worker EITC, the costs must be balanced. For labor force participation and employment outcomes to improve, the credit needs to be large enough to encourage people into the labor market, but a large credit may be cost prohibitive.

Source: Angela Rachidi, "Balancing the Trade-offs: Options for Expanding the Childless Worker Earned Income Tax Credit," American Enterprise Institute, June 2015. 


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