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Exploring Design Changes to Retarget Tax Credits
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The earned income tax credit (EITC) and child tax credit (CTC) provide substantial benefits to working families with children. The EITC also provides modest benefits to workers without custodial children, often called “childless workers” for tax purposes. Together, the credits lift almost 9 million people out of poverty each year. In this brief, we summarize the fiscal cost and the distribution of benefits of four major Congressional proposals to expand these or similar benefits and how the share of benefits is distributed across income groups. We show how fiscal costs could be reduced and benefits better targeted to intended groups by altering key parameters in the proposals.