The Earned Income Credit: Does it Work?
Revised February 24, 2000 The Maryland General Assembly is considering legislation that would increase the state’s refundable earned income credit (EIC) for low-income workers with children. This analysis seeks to inform the debate on the EIC by reporting on the academic literature on the effects of the EIC on poverty, work, and participation in welfare programs. Summary of Findings The EIC is an effective anti-poverty policy tool. In 1998, the federal EIC lifted 4.8 million people in working poor families above the poverty thresholds. More than half of the people lifted above poverty were children. A state EIC lifts additional families out of poverty. The EIC encourages work. Several studies have found that, after accounting for other factors, the federal EIC has been a major inducement to single parents to enter the labor force. States that offer EICs have been shown to have particularly high labor force participation. The EIC leads to reduced participation in welfare programs. One s
