The Earned Income Tax Credit (EITC) is a refundable tax credit available to eligible workers earning relatively low wages. Since the credit is refundable, an EITC recipient need not owe taxes to receive the benefit. Many low-income workers, especially those with children, may be eligible to receive the EITC. The EITC, enacted more than 40 years ago, has evolved from a relatively modest tax benefit to a significant antipoverty program. As the credit has expanded and changed over time, researchers have evaluated various aspects of the credit, including how the EITC affects recipients' decision to start working (and number of hours they work); how the credit affects poverty rates; and difficulties that taxpayers have with complying with the credit's rules. This report reviews current economic research on the EITC. An understanding of the economic impacts of the credit, as well as its limitations and potential drawbacks, may inform future legislative modifications of the EITC or the structure of other social benefits provided in the tax code. This report first briefly outlines the history of the EITC, focusing on its evolution from a modest "work bonus" to a major antipoverty program. Next the report turns to an evaluation of the credit, reviewing the economic literature on how the credit has affected taxpayers' decisions to work (what economists refer to as "labor supply decisions"), how it has affected certain education and health outcomes of recipients and their children, how it has affected tax burdens among different taxpayers, and the complexity of administering this tax provision. This report does not provide a detailed overview of the credit. For more information on eligibility for and calculation of the EITC, see CRS Report R43805, The Earned Income Tax Credit (EITC): An Overview , by [author name scrubbed] and [author name scrubbed]. Before the EITC's enactment in 1975, cash welfare payments were the primary form of federal financial support for poor families with children. However, during the 1960s and 1970s, in the face of increasing concern over growing welfare rolls, some policymakers became interested in alternative forms of aid. Economist Milton Friedman proposed a negative income tax (NIT) that would have provided a guaranteed minimum level of income administered through the tax code. President Nixon, influenced by the NIT, proposed in 1969 a "family assistance plan" (FAP) that would have benefited both the working and nonworking poor with children, effectively replacing the existing cash welfare program known at the time as Aid to Families with Dependent Children (AFDC). While the Nixon plan never became law, it was twice approved by the House. Senator Russell Long, then chairman of the Senate Finance Committee, expressed interest in an alternative government assistance program which would encourage the poor to work by providing them with a "work bonus" or supplement to their wages. Senator Long's "primary objection to the NIT was that it provided its largest benefits to those without earnings" and would hence discourage people from working. In contrast, Senator Long stated that his proposed "work-bonus plan" was "a dignified way" to help poor Americans "whereby the more he [or she] works the more he [or she] gets." In addition, the work-bonus plan was seen as a way to help reduce increasing payroll tax burdens. The worker's share of payroll taxes had risen from 1.5% in 1950, to 3.0% in 1960, and 4.8% in 1970. During the 1960s and 1970s, there was a growing belief among policymakers that payroll taxes, as a regressive tax, especially burdened the working poor. Several antipoverty task forces also "showed that future refinancing of the Social Security system might encumber the poor even more." Advocates of the work-bonus plan believed that payroll taxes reduced the poor's income to such an extent that the only way they could make ends meet was to receive welfare. According to Long, his "work bonus plan" would "prevent the social security tax from taking away from the poor and low-income earners the money they need for support of their families." In 1975, the work bonus plan was enacted on a temporary basis as part of the Tax Reduction Act of 1975 and renamed the Earned Income Tax Credit. In addition to encouraging the poor to work and reducing their dependence on cash welfare, the credit was also viewed as a means to encourage economic growth in the face of the 1974 recession and rising food and energy prices. Since the EITC was viewed in part as an alternative to cash welfare, it was generally targeted to the same recipients—single mothers with children. (Childless poor adults would not receive the credit until the 1990s, discussed subsequently.) The credit was extended several more times on a temporary basis before being expanded and made permanent by the Revenue Act of 1978 ( P.L. 95-600 ). Making the credit permanent reflected Congress's belief "that the earned income credit is an effective way to provide work incentives and relief from income and Social Security taxes to low-income families who might otherwise need large welfare payments." In the late 1980s and 1990s, policymakers remained interested in the EITC as an antipoverty program. A Wall Street Journal article from 1989 described the EITC as "emerging as the antipoverty tool of choice among poverty experts and politicians as ideologically far apart as Vice President Dan Quayle and Representative Tom Downey, a liberal New York Democrat." President Bill Clinton, a champion of the EITC as a poverty-reduction tool, declared that expanding the credit would "reward the work of millions of working poor Americans by realizing the principle that if you work 40 hours a week and you've got a child in the house, you will no longer be in poverty." As one scholar noted, "President Clinton's declaration completed the evolution of the EITC from Senator Long's modest 'work bonus' to a major antipoverty initiative." Before the 1990s, the EITC's structure limited its ability to reduce poverty among families of different sizes. As illustrated in Table 1 , the EITC as originally designed did not vary by family size. Thus, as family size increased, the credit became less effective at helping a family meet its needs. The EITC was restructured to vary based on family size beginning modestly with the Omnibus Reconciliation Act of 1990 (OBRA90; P.L. 101-508 ) and greatly expanded by the Omnibus Reconciliation Act of 1993 (OBRA93; P.L. 103-66 ). Specifically, the EITC was now calculated such that at any given level of earnings, the credit was one size for a taxpayer with a single child and larger for taxpayers with two or more children. For example, when OBRA93's legislative changes had fully phased in, taxpayers with one child could receive a maximum credit of $2,152, while families with two or more children could receive a maximum credit of $3,556 in 1996. The 1993 bill also extended the credit to childless workers for the first time (see Table 1 ). Unlike the expansion of the credit for workers with children, the main rationale for this "childless EITC" was not poverty reduction. Instead the credit was intended to partly offset a gasoline tax increase included in OBRA93. The credit for childless workers was smaller than the credit for workers with children. It was calculated as 7.65% of the first $4,000 of earnings, for a $323 maximum credit in 1996. Notably, aside from inflation adjustments, the formula for the childless EITC has remained unchanged since OBRA93. At the beginning of 2000, there was congressional interest among both political parties in reducing marriage penalties (although the means by which they intended to achieve this goal varied). For low-income taxpayers with little or no tax liability, a marriage penalty is said to occur when a married couple receives a smaller refund than the combined refund of each partner filing as unmarried. (Marriage bonuses also arise in the U.S. federal income tax code. ) In 2001, the Joint Committee on Taxation (JCT) identified the structure of the EITC as one of the primary causes of the marriage penalty among low-income taxpayers. In 2001, Congress chose to reduce the marriage penalty in the EITC. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) gradually increased the income level at which the credit phased out for married couples by $3,000 (adjusted for inflation). In 2009, ARRA temporarily increased EITC marriage penalty relief to $5,000, also adjusted for inflation. This change was originally in effect for 2009 and 2010. The increased marriage penalty relief was extended for 2011 and 2012 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) and further extended from 2013 until the end of 2017 by the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ; ATRA). The Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113 ) made the $5,000 of EITC marriage penalty relief permanent. There are eight formulas currently in effect to calculate the EITC (four for unmarried individuals and four for married couples, depending on the number of children they have), as illustrated in Table 2 . For any claimant, the credit has three value ranges that vary by income, as illustrated in Figure 1 . First, the credit value increases to its maximum value from the first dollar of earnings until earnings reach the "earned income amount." Over this "phase-in range" the credit value is equal to the credit rate multiplied by earnings and is represented as the upward sloping line of the schedule.