"The Earned Income Tax Credit has emerged as one of the most important and most innovative aspects of the U.S. safety net. It is one of the few components of our safety net that Western European nations are beginning to adopt themselves. Making Work Pay presents much of the latest and most important research on this credit and its effects."
-ROBERT GREENSTEIN, CENTER ON BUDGET AND POLICY PRIORITIES
"Over the past twenty-five years, the earned income tax credit (EITC) has become the federal government's largest cash transfer program for low-income households, and has received support from both the right and left. In this book, a highly-qualified group of authors provides wide-ranging and detailed analyses of the history, politics, economic effects, uses, optimal design, and other aspects of the EITC. Making Work Pay is both an excellent introduction to the EITC as well as a compendium of state-of-the-art research on the topic. The book is not just 'must reading' for anyone interested in the EITC; it will be the standard against which other contributions are measured."
-WILLIAM G. GALE, BROOKINGS INSTITUTION
"The earned income tax credit is a cornerstone of the nation's antipoverty efforts, delivering more than $30 billion annually to low-income working families. This authoritative history and analysis of the credit discusses its effects on labor markets, family structure, and economic well being, and its administration and policy implications. It is a fine example of high-quality academic research informing important policy issues."
-JOHN KARL SCHOLZ, UNIVERSITY OF WISCONSIN-MADISON
Since its inception under President Ford in 1975, the Earned Income Tax Credit (EITC) has become the largest antipoverty program for the non-elderly in the United States. In 1998, more than nineteen million families received EITC payments, and the program lifted over four million Americans above the poverty line. Despite the rapid growth of the EITC throughout the 1990s, little has been written about how the program works or how it affects low-income families. Making Work Pay provides the first full-scale examination of the EITC, exploring its effects on income distribution, poverty, work, and marriage.
Making Work Pay opens with a history of the EITC -- its emergence in the 1970s as a pro-work, low-cost antipoverty program and its expansion through the 1980s and 1990s. The central chapters in the volume look at the substantial impact of the EITC on work incentives in recent years and show that the program, in combination with welfare reform and a strong economy, has led to an unprecedented increase in the employment of single mothers. In one study, researchers conclude that the EITC—with its stipulation that one family member be a wage earner—was the most important change in work incentives for single mothers between 1984 and 1996, a period when the employment rate of single mothers rose sharply. Several chapters outline proposals for reforming the program, addressing the concerns by policymakers about the work disincentives that rise as benefits fall with increasing income. Finally, Making Work Pay examines how EITC recipients view the credit and what they do with it once they get it. The contributors find that not only does EITC's lump-sum payment increase consumption but it also allows recipients to make changes in economic status. Many families use the end-of-the-year payment as a form of forced savings, enabling them to save for home improvement, a new car, or other purchases to improve their lives, and providing the extra economic cushion needed to move beyond mere day-to-day survival.
Comprehensive in scope, Making Work Pay is an indispensable resource for policymakers, administrators, and researchers seeking to understand the ramifications of the country's largest programs for aiding the working poor.
BRUCE D. MEYER is professor of economics at Northwestern University.
DOUGLAS HOLTZ-EAKIN is at the Center for Policy Research, Syracuse University.
CONTRIBUTORS: Lisa Barrow, David T. Ellwood, Janet Holtzblatt, Jeffrey B. Liebman, Janet McCubbin, Leslie McGranahan, Michael O'Connor, Katherin Ross Phillips, Robert Rebelein, Jennifer L. Romich, Dan T. Rosenbaum, Timothy M. Smeeding, Dennis J. Ventry Jr., Thomas S. Weisner.