Earned Income Tax Credit: Path Dependence and the Blessing of Undertheorization

by Michael B. Adamson

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Abstract

Some commentators have lamented that the Earned Income Tax Credit (EITC) is undertheorized—that its purpose is unclear—and that its design is therefore suboptimal. This Note explores the credit’s path-dependent past, which has resulted in a present-day EITC that manifests a diverse, uncoordinated assortment of policy purposes. Although the EITC’s ambiguity of purpose may yield policy inefficiencies, this Note argues that it also produces significant political benefits that would-be reformers who value the EITC’s many societal benefits should take into account before they attempt to enact any major overhaul.

Earned Income Tax Credit: Path Dependence and the Blessing of Undertheorization

by Michael B. Adamson

Click here for a PDF file of this article

Abstract

Some commentators have lamented that the Earned Income Tax Credit (EITC) is undertheorized—that its purpose is unclear—and that its design is therefore suboptimal. This Note explores the credit’s path-dependent past, which has resulted in a present-day EITC that manifests a diverse, uncoordinated assortment of policy purposes. Although the EITC’s ambiguity of purpose may yield policy inefficiencies, this Note argues that it also produces significant political benefits that would-be reformers who value the EITC’s many societal benefits should take into account before they attempt to enact any major overhaul.