The EITC Marriage Tax and EITC Reform

The Earned Income Tax Credit (EITC) provides marriage bonuses to some married couples and imposes marriage penalties on many others. The sources of these bonuses and penalties are the EITC eligibility rules, its non-linear benefit structure, and the phase-out of benefits at higher incomes. In this paper, we examine the source of the EITC marriage penalty, simulate the impact on the EITC marriage penalty of the reform included in the Economic Growth and Tax Relief Act of 2001, and then propose and examine additional reform that would both provide further relief from the EITC marriage penalty and improve labor supply incentives at the same time.