12
Appendices
Ensure Comparable
Protections
Limit Summary
Assessment Authority
Establish Greater
IRS Oversight
Restructure the
EITC As Two Credits
Introduction
Earned Income Tax Credit — Restructure the EITC As Two Credits
individuals.
49
And given the relatively small benefit (and lower participation rate)
50
it is unlikely to have
any labor supply increasing effect among low income childless adults.
Concerns about the size and limited effect on poverty and labor force participation of the childless
EITC have become more relevant in light of research showing decreased labor force participation of
some childless adults and stagnant wage growth among many workers, especially the poorest workers.
51
Indeed, a recent proposal by Leonard Burman to create a substantially larger and near universal per-
worker EITC is partially conceived as a way to encourage work and mitigate wage stagnation for both
low and middle income workers.
52
In addition, TAS, the IRS, and other organizations have repeatedly documented how the EITC’s
complex structure burdens taxpayers and is difficult for the IRS to administer.
53
Much of the
complexity, administrative issues difficulty, and taxpayer burden associated with the credit center around
the qualifying child rules.
First, the IRS cannot independently verify that a child meets all the current EITC qualifying child
rules, especially the residency requirement, during filing season. There is no national, authoritative, and
timely database that indicates where and with whom a child lives during a calendar year for the purposes
of administering this tax benefit, making accurate verification of this requirement difficult. Nor do we
believe U.S. taxpayers would tolerate the government creating such a database. Failure of a taxpayer
49
Chuck Marr et al., Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty 6 (2016),
https://www.cbpp.org/research/federal-tax/strengthening-the-eitc-for-childless-workers-would-promote-work-and-reduce.
In addition, analysis by the Congressional Research Service indicates that the EITC reduces the proportion of unmarried
childless workers in poverty from 19.9 percent to 19.6 percent (a 1.5 percent reduction). In comparison, the EITC reduces
the proportion of unmarried households with three children in poverty from 40.5 percent to 32.3 percent (a 20.2 percent
reduction). Margot Crandall-Hollick & Joseph Hughes, Cong. Research Serv., R44057, The Earned Income Tax Credit (EITC):
An Economic Analysis (2018).
50
For TY 2016, an estimated 65 percent of eligible childless workers claimed the EITC, compared to an estimated 86 percent
participation for those with one child, 85 percent participation for those with two children, and 82 percent participation for
those with three children. For more information, see the EITC Databook appendix, infra.
51
See Figure 4 in Chuck Marr et al., Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty 6
(2016), https://www.cbpp.org/research/federal-tax/strengthening-the-eitc-for-childless-workers-would-promote-work-and-
reduce; Isabel V. Sawhill & Christopher Pulliam, Lots of plans to boost tax credits: which is best?, brookings insT. (Jan. 15,
2019), https://www.brookings.edu/research/lots-of-plans-to-boost-tax-credits-which-is-best/. See also, Dylan Matthews,
Senate Democrats have coalesced around a big plan to expand tax credits, Vox (April 10, 2019), https://www.vox.com/future-
perfect/2019/4/10/18302183/tax-cut-democrats-earned-income-tax-credit-child-allowance; Peter S. Goodman & Jonathan
Soble, Global Economy’s Stubborn Reality: Plenty of Work, Not Enough Pay, n.y. TimEs, Oct. 7, 2017, https://www.nytimes.
com/2017/10/07/business/unemployment-wages-economy.html; Jay Shambaugh et. al., Thirteen Facts about Wage Growth
(2017); Matthew Desmond, Americans Want to Believe Jobs Are the Solution to Poverty. They’re Not, n.y. TimEs, Sept. 11,
2018, https://www.nytimes.com/2018/09/11/magazine/americans-jobs-poverty-homeless.html.
52
Leonard E. Burman, A Universal EITC: Sharing the Gains from Economic Growth, Encouraging Work, and Supporting Families
(2019).
53
See National Taxpayer Advocate 2016 Annual Report to Congress 325-340 (Legislative Recommendation: Tax Reform:
Restructure the Earned Income Tax Credit and Related Family Status Provisions to Improve Compliance and Minimize Taxpayer
Burden); National Taxpayer Advocate Fiscal Year 2017 Objectives Report to Congress 113-118 (Area of Focus: Earned
Income Tax Credit Reform Could Reduce the EITC Improper Payment Rate Without Reducing Participation by Eligible Taxpayers);
Margot Crandall-Hollick, Cong. Research Serv., R43873, The Earned Income Tax Credit (EITC): Administrative and Compliance
Challenges (2018); IRS Pub. 5162, Compliance Estimates for the Earned Income Tax Credit Claimed on 2006-2008 Returns
(Aug. 2014); Jason J. Fichtner, William G. Gale & Jeff Trinca, Tax Administration: Compliance, Complexity, and Capacity
(2019); Elaine Maag, Simplicity: Considerations in Designing a Unified Child Credit, 63 naT’l Tax J. 765 (2010). In addition, in
its most recent Annual Financial Report, the Treasury Department stated “Treasury and IRS analyses, as well as audits by
the Government Accountability Office (GAO) and Treasury Inspector General for Tax Administration (TIGTA), have consistently
found that payment errors for EITC and other tax credit programs are largely attributable to the statutory design and
complexity of the credits within the tax system, and not rooted in internal control weaknesses, financial management or
financial reporting deficiencies.” Department of the Treasury, Agency Financial Report Fiscal Year 2018 150 (2018).