Comments on: What is the Earned Income Tax Credit?

By: tammi

tammi — Thu, 15 Apr 2010 22:01:01 +0000

It is redistribution. If you are getting back more than you paid in. Total crap, not jeolous of your legal ability to screw other tax payers and this country.

By: ladam8518

ladam8518 — Thu, 21 Jan 2010 14:39:36 +0000

EITC doesn’t come out of my pocket?

Think of the Tax System as a general system governed by:

Money In – Money Out + Money Created = Accumulation

In general system analysis Accumulation is set to zero (to achieve a steady-state) and to avoid devaluing the currency Creation should be set to 0.

As an example take a single filer claiming two children who has maximum federal withholding and earned $15,000 for the year paid semi-monthly. This person paid $1,125 (using IRS Pub 15, 2010 version) in Federal Income tax withholding. They would be eligible for about $5,000 of EITC (using 2008 numbers), This results in a $3,875 deficit that must be made up by other tax payers (or reduced government spending, if ever possible) in order to achieve a steady-state.

Unlike most credits, EITC is a refundable credit (also called a below-the-line credit). This means you can get it refunded back to you. Nonrefundable (or above-the-line) credits are limited to the taxpayer’s tax liability. If someone gets a refund due to above-the-line credits, all that is being refunded comes from that persons withholding or other tax payments.

By: choc62

choc62 — Thu, 21 Jan 2010 11:36:52 +0000

earned is good incentive for people to go to work, otherwise everything they make goes out the door any way and welfare looks better, and thats your tax dollar, eitc doesn’t come out of your pocket, so don’t hate, appreciate….

By: Lisa

Lisa — Wed, 06 Jan 2010 19:33:13 +0000

NO IT IS NOT!!! WE DO NOT GTE ANY WELFARE, BUT 4 ONCE, WE GET EITC!!! KISS BUTT! U R JUST JEALOUS!

By: Paige

Paige — Thu, 31 Dec 2009 06:35:29 +0000

I have to agree with CK. I know people that get $5-7K back every year. That is ridiculous. They might as well not even pay in. Welfare is exactly what this is.

By: Jessica

Jessica — Wed, 30 Dec 2009 19:43:10 +0000

A.K.A. redistribution of wealth!

By: aua868s

aua868s — Wed, 30 Dec 2009 15:38:32 +0000

i would not qualify for this…but i feel happy that i am make enough not to qualify for this!

By: Funny about Money

Funny about Money — Wed, 30 Dec 2009 14:42:06 +0000

Good explanation of this important benefit. One of my research assistants was able to finish her degree largely because of the EITC, after her husband left her to run off with a chickadee in his office. Nothing like family values to keep us all off welfare, eh?

By: CK

CK — Wed, 30 Dec 2009 14:24:12 +0000

What is the Earned Income Tax Credit?
Welfare.

By: Shirley

Shirley — Wed, 30 Dec 2009 14:07:19 +0000

Thanks! I will check this out as a grandson has been living with us all this year.

By: eric

eric — Wed, 30 Dec 2009 08:13:54 +0000

Knew of it but thanks for the specifics

By: mylindaelliott

mylindaelliott — Tue, 29 Dec 2009 18:22:13 +0000

I continue to find families in my work who don’t know about this. It surprises me every time.

By: Chris

Chris — Tue, 29 Dec 2009 18:16:11 +0000

Thanks Jim. I never quite knew what this was.

By: Adam

Adam — Tue, 29 Dec 2009 15:33:07 +0000

The only part of the credit you missed that may be worth noting in this brief of a discussion is the curve it tends to follow. The EITC follows a sort of modified bell curve. That is, EITC increases with earned income until the maximum credit is reached holds constant for a range, and then begins to fall until the threshold is reached.

In my opinion, the concept for this curve was that the first half of the curve provides incentive to lower income earners to increase wages while the second half of the curve establishes a minimum baseline of income (between earned income and the credit).

Plotting the sum of earned income and the EITC results in lines that start following a 45 degree line (1 for 1 increase) then jump above it and slowly converge back down to it.

At $20,000 Earned Income (2008 numbers, MFJ with 2 QC) the credit is worth just under $5,000 ($4,553 to be exact). Basically, congress decided that at this level a married couple with two children need $1.25 for every $1.00 earned. This ratio never drops below 1:1 but varies up to 5:4 (which is the example).

I have charts showing the above trends for 2008, if Jim wants I can email them to him.

By: zapeta

zapeta — Tue, 29 Dec 2009 14:14:04 +0000

Thank you for explaining this, Jim! Every year my tax software checks for this and I never really researched the EITC to see what it was all about.