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What is the Earned Income Tax Credit?

The Earned Income Tax Credit is a refundable federal income tax credit for low-income working individuals and families. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. The Earned Income Tax Credit was responsible for significant declines in poverty and economic gains during the 1990s, but it can still be strengthened to improve its effectiveness.

The Center for American Progress has proposed four ways to improve the existing EITC so that poor families can better help themselves rise out of poverty while stimulating consumer spending and economic growth.

Read the full issue brief here.