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The Earned Income Tax Credit (EITC): A Brief Legislative History
Introduction
The earned income tax credit (EITC), when first enacted in 1975, was a modest tax credit
providing financial assistance to low-income working families with children. (It was also initially
a temporary tax provision.) Today, the EITC is one of the federal government's largest
antipoverty programs, having evolved through a series of legislative changes over the past 40
years. Since the EITC's enactment, Congress has shown increasing interest in using refundable
tax credits for a variety of purposes, from reducing the tax burdens of families with children (the
child tax credit), to helping families afford higher education (the American opportunity tax
credit), to subsidizing health insurance premiums (the premium assistance tax credit). The
legislative history of the EITC may provide context to current and future debates about
refundable tax credits.
The report first provides a general overview of the current credit. The report then summarizes the
key legislative changes to the credit and provides analysis of some of the congressional intentions
behind these changes. An overview of the current structure of the EITC can be found in
Appendix A at the end of this report. For more information about the EITC, see CRS Report
R43805, The Earned Income Tax Credit (EITC): An Overview.
An Overview of the History of the EITC
Major legislative changes to the EITC over the past 40 years can generally be categorized in one
of two ways: Those that increased the amount of the credit by changing the credit formula or
those that changed eligibility rules for the credit, either expanding eligibility to certain workers
(for example, certain servicemembers) or denying the credit to others (for example, workers not
authorized to work in the United States). Together, these changes reflect congressional intent to
expand this benefit while also better targeting it to certain recipients. A summary of some of the
major changes to the EITC can be found in Table 1. A summary of the growth in the EITC in
terms of both the amount of the credit and the number of claimants over time can be found in
Figure 1, which includes the dates of key legislative changes to the credit.
Before Enactment
The origins of the EITC can be found in the debate in the late 1960s and 1970s over how to
reform welfare-known at the time as Aid to Families with Dependent Children (AFDC).' During
this time, there was increasing concern over the growing numbers of individuals and families
receiving welfare.2 In 1964, fewer than 1 million families received AFDC. By 1973, the AFDC
rolls had increased to 3.1 million families. Some policymakers were interested in alternatives to
cash welfare for the poor. Some welfare reform proposals relied on the "negative income tax"
(NIT) concept. The NIT proposals would have provided a guaranteed income to families who had
no earnings (the "income guarantee" that was part of these proposals). For families with earnings,
1 For more information on the legislative history of welfare in the United States, see CRS Report R44668, The
Temporary Assistance for Needy Families (TANF) Block Grant: A Legislative History, by Gene Falk.
2 According to Ventry, "In 1960, before President Johnson deployed his forces for a war on poverty, 3.1 million
received [Aid to Families with Dependent Children] AFDC. By 1969, that number had risen to 6.7 million, and would
jump again to 9.0 million by 1970." Dennis J. Ventry, "The Collision of Tax and Welfare Politics: The Political History
of the Earned Income Tax Credit, 1969-1999," National Tax Journal, vol. 53, no. 4 (December 2000), p. 988.Congressional Research Service
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Crandall-Hollick, Margot L. The Earned Income Tax Credit (EITC): A Brief Legislative History, report, April 26, 2017; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1042208/m1/4/: accessed May 31, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.