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1 Jeffrey Scott Moody & Arthur P. Hall, Growth of the Earned Income Tax Credit 1 (1995)

handle is hein.taxfoundation/srfdxz0001 and id is 1 raw text is: September 1995 Number 53 (Growth 1f tle Ei ned tn. on: hPx~t ited The larned Income Tax Crcdit (EITC) became a part of the federal tax code with the Tx Reduction Act of 1975. It had two major objectives: (1) to provide tax relief to low- income workers with children by offsetting the burden of payroll taxes used to finance Social Security, Medicare, and I 'ncmployment I11surancC; and (2) to provide an incentive for peoplc to seek gainful employment instead of welfare. Since its enactment in 197 5, the FtT( has been greatly expanded, as illustrated by Figuore I. 1Tble I shows that in fiscal Year 1976 the total Valuc of the ElI''C amounted to S 1.1 billion. By fiscal year 2000, the w aLuC is expected to exceed $30 billion. The rapid growth of the EITC program has resulted from successive legislative expansions of both the size of the credit and the size of the popula- tion eligible to receive the credit. The history of the EITC comprises four distinct legislative periods (see Figuwe I). The growth in periods two, three, and four arc the result of the Tax Rcform Act of 1986 (TRA 86), I/g Ure I Tltl Valuie o/lwh IPlC TRA86 D Current Dollars Z Constant 1996$ Period I $5,000 [_____d____ - 1 iifl r OBRA90 OBRA93 Period II Period Ill I + '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95e'96e'97e '98e '99e '20e SOU'C C: 'lIx FICditn011 Ofic c ot Managcnw ft and Iludget, 101111 ( omitucc oil Taxation. BjI'l fe/')' Scoll Moody kesearcl Iellow' Ia.v lqmtf/liml ,irlhb I'. Hall, P1I). < F~io ;collolisl l'lx IFottidaliont $35,000 r $30,000 $25,000 $20,000 $15,000 $10,000 Period IV T J