One of the current administration's plans is to "expand the Earned Income Tax Credit (EITC) to older workers" (65 years old or older) in the hope of "helping low-wage workers achieve a living wage"

i) Explain how an EITC works.

Make a graph, using the Table 7.5 of textbook to highlight its effects on the income of the poor. (Have the annual earned income to the horizontal axis & annual disposable income to the vertical axis.)

ii) How would this expansion of the EITC affect workers? What would be the effect relative to a simple stipend or a negative income tax (NIT)?

Explain the EITC's effects on work incentives. Compare and contrast the EITC to those alternatives.

Transcribed Image Text:

Table 7.5 The EITC: Single-Parent, Two-Child Family in 2018 TOTAL EARNED INCOME EITC $ 0 $ 0 2,000 810 4,000 1,610 6,000 2,410 8,000 3,210 11,000 4,410 15,000 5,716 20,000 5,429 30,000 3,323 44,000 Source: Internal Revenue Service. Table 7.5 The EITC: Single-Parent, Two-Child Family in 2018 TOTAL EARNED INCOME EITC $ 0 $ 0 2,000 810 4,000 1,610 6,000 2,410 8,000 3,210 11,000 4,410 15,000 5,716 20,000 5,429 30,000 3,323 44,000 Source: Internal Revenue Service.

Answer rating: 100% (QA)

i The Earned Income Tax Credit EITC is a refundable tax credit designed to provide financial assistance to lowincome workers and families It is primarily targeted at individuals or families with earne... View the full answer