That program is the Earned Income Tax Credit. The EITC is the nation’s second largest means-tested cash welfare program. EITC, unlike other welfare programs, is structured to give incentives to work. But reforms are needed to help it better achieve that purpose — and to ensure that it doesn’t discourage marriage.
EITC provides “refundable” tax credits to low-income individuals. What’s a “refundable tax credit,” you may ask? It’s simply a cash welfare grant to individuals who have no federal income tax liability.
Historically, around two-thirds of the families with children receiving the EITC are single parents, and one-third are married couples, according to welfare expert Robert Rector. The average value of an EITC payment to a family with children was $2,919.
Now, there are several problems with the EITC program that need to be addressed. Fraud is rampant, for one thing. Erroneous overclaims account for at least a quarter of the $59 billion in annual EITC spending.