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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 Did P.L. 115-97 Modify the EITC?
providing financial assistance to low-income
working families with children. (It was also At the end of 2017, President Trump signed into law P.L.
I I5-971 which made numerous changes to the federal
initially a temporary tax provision.) Today, the income tax for individuals and businesses.2 However, the
EITC is one of the federal government's final law did not make any direct changes to the EITC.
largest antipoverty programs, having evolved The law did however indirectly affect the credit's value in
through a series of legislative changes over the future years. Parameters of the EITC (see Table A-I)
past 40 years. Since the EITC's enactment, are indexed to inflation. Prior to P.L. I I5-97, this
Congress has shown increasing interest in measure of inflation was based on the consumer price
index for urban consumers (CPI-U). P.L. 15-97 changed
using refundable tax credits for a variety of this inflation measure to be permanently based on the
purposes, from reducing the tax burdens of chained CPI-U3 (C-CPI-U). In comparison to CPI-U,
families with children (the child tax credit), to chained CPI-U tends to grow more slowly. Hence, over
helping families afford higher education (the time, the monetary parameters of the EITC will increase
American opportunity tax credit), to more slowly in comparison to what they would have
been if P.L. 115-97 had not been enacted.
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
R43 805, 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
1 The original title of the law, the Tax Cuts and Jobs Act, was stricken before final passage because it violated what is
known as the Byrd rule, a procedural rule that can be raised in the Senate when bills, like the tax bill, are considered
under the process of reconciliation. The actual title of the law is "To provide for reconciliation pursuant to titles II and
V of the concurrent resolution on the budget for fiscal year 2018." For more information on the Byrd rule, see CRS
Report RL30862, The Budget Reconciliation Process: The Senate's "Byrd Rule ", by Bill Heniff Jr.
2 For more information on the changes made to the tax code by P.L. 115-97 see CRS Report R45092, The 2017 Tax
Revision (P.L. 115-97): Comparison to 2017 Tax Law, coordinated by Molly F. Sherlock and Donald J. Marples.
3 For more information, see Michael Ng and David Wessel, Up Front The Hutchins Center Explains: The Chained
CPI, The Brookings Institution, December 7, 2017, https://www.brookings.edu/blog/up-front/2017/12/07/the-hutchins-
center-explains-the-chained-cpi/.Congressional Research Service
1
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Crandall-Hollick, Margot L. The Earned Income Tax Credit (EITC): A Brief Legislative History, report, March 20, 2018; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1157024/m1/4/: accessed May 30, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.