The And Effect Of The Earned Income Tax Credit

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Introduction This report examines the provisions, purpose, and impact of the Earned Income Tax Credit (EITC). It will consider both positive and negative arguments for the program, and review suggested alternatives. Finally, it will give supporting evidence as to why the EITC is a flawed, yet overall beneficial program for the nation’s war against poverty. As one of the most heavily debated tax issues since the 90s, the EITC is an important anti-poverty program that requires attention and understanding by all American citizens. In order to gauge the effectiveness of the EITC, it is important to understand what the EITC is, as well as its purpose, and then measure current performance. Provisions The EITC is a tax credit for low to moderate income earning individuals and families. This credit is a refundable tax credit, meaning that citizens may have their federal taxes lowered, brought to zero, or even earn a refund if it exceeds the amount of taxes owed. The credit amount is dependent upon a beneficiary’s earned income and number of children. Earned income includes all the taxable income and wages a person receives from working for someone else or if they own or run a business or farm. In order to receive the tax refund, workers must file a tax return, even if their income is less than the filing requirement. The EITC is structured with a phase-in, meaning that as a taxpayer’s income increases, the value of the credit the taxpayer earns increases until it hits the maximum
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