Association for Public Policy Analysis & Management

The Earned Income Tax Credit (EITC) is largely perceived as the most effective anti-poverty program for non-seniors in the United States. However, this result is based on simulated EITC benefits using either the Census Bureau’s tax module, or from the National Bureau of Economic Research’s TAXSIM module. Both simulation programs utilize model-based assumptions on who is and who is not eligible for the EITC, and conditional on eligibility, assume that participation is 100 percent. However, recent evidence suggests that take-up of the EITC is considerably less than 100 percent, and thus claims regarding the impact of the program on measures of poverty may be overstated. We use data from the Current Population Annual Social and Economic Supplement linked to IRS tax data on the EITC to compare the distribution of EITC benefits from the two tax simulation modules to administrative tax records. We then compare the anti-poverty impact of the EITC across the three measures of EITC benefits using both headcount measures of poverty and distributionally sensitive measures such as poverty gaps.