The challenge
Low-paid work often left families in poverty, and welfare could discourage employment.
The case
The US Earned Income Tax Credit, created in 1975 and expanded several times since, pays low- and moderate-income working families a refundable credit that rises with earnings up to a ceiling. Because it only goes to people who work, it was designed to reward employment. Studies of the 1986 and 1990s expansions found they significantly increased employment among single mothers, and research credits the EITC with lifting millions of people above the poverty line each year. After the 1986 expansion, single women with children increased their relative labor force participation by up to 2.8 percentage points between 1984–1986 and 1988–1990.
Why it worked
Delivering support through the tax system kept administration cheap and avoided the stigma of welfare, which helped it win support from both parties. Millions of eligible families still don't claim it, so outreach matters.
Sources
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