The Earned Income Tax Credit and Welfare Reform

The focus of this paper is the EITC and its important role in welfare reform. The current welfare system has been criticized on the grounds that it does not promote and encourage work. Critics also claim that welfare welfare is ineffective in reducing poverty, especially among children. The EITC addresses several of these complaints.

First, the EITC "[i]s strongly pro-work. Only working families qualify for it. In addition, unlike welfare benefits, EITC payments rise rather than fall with earnings across that critical low-income range where we want to encourage work effort." Proponents of the EITC, such as Senator Bill Bradley (D-NJ), feel that it is "an effective, practical tool that provides working Americans the chance to climb the economic ladder to the middle class and build better opportunities for their families." The effectiveness of the EITC can be evaluated by exploring its practical implications for a hypothetical family of four. Using this as a background, it will be possible to review both the benefits and drawbacks of the EITC as a welfare entitlement program.