Distinguishing Between Short-Term and Long-Term Recipients of the Earned Income Tax Credit

Since its enactment in 1975, the Earned Income Tax Credit (EITC) has evolved from a small program to alleviate some of the tax burden of the payroll and income tax on low-income working parents to become a significant part of the Federal government's redistribution efforts. This paper presents preliminary work from a unique data set and is meant to raise questions as well as present new evidence regarding the EITC. This study examines a panel of taxpayers over 15 years to determine the extent to which the EITC acts as a safety net for workers experiencing temporary income and employment shocks. I find that between 40 and 50 percent of EITC recipients claim the EITC for short periods of time (one to two years). Finally, I provide descriptive information about the characteristics of temporary versus more permanent EITC recipients, with a particular focus on the effects of changes in the economy and state welfare policies.