All aff cards are in context of the squo- the expansion solves.

The EITC in its current form provides moderate income support to parents of minor children and has the strength of creating work incentives for very low-income workers, but it is criticized for (i) creating disincentives to work when the credit is being “phased out;” (ii) creating perverse incentives with respect to family structure and insufficiently supporting childless workers and noncustodial parents; (iii) being hampered by administrative complexity and delay; and (iv) being too small to eradicate poverty, especially for childless workers. Happily, all four of these criticisms could be addressed in an expanded EITC that functions more like a UBI. This section discusses how. The first proposal is perhaps the most radical, and (for that reason?) has not been advocated in any of the existing proposals to reform the EITC that I know of, but it would have some very significant benefits. That reform is to remove the phase-out of the benefit, so once a worker earned sufficient income to qualify for the maximum credit, they would receive it no matter how high their income got during the year. The primary benefit of such a structure is that it would remove the concentrated work disincentives (the “poverty trap”) caused by the phase-out of the benefit.212 It would also dramatically simplify the administrative burden because the government would not need to withdraw benefits as income rises in the phase-out range.213 Once it was determined that a recipient earned enough to qualify for the full credit, both the recipient and the government could rely on the fact that the recipient qualified for the full credit, without any concern that future earnings would reduce the credit the recipient was due.214 This reform would make further reforms described later much easier to implement, especially distributing the benefit monthly instead of annually. As discussed above, UBI advocates argue that a universal benefit with no phase-out is superior to a means-tested benefit for two primary reasons. First, removing the phase-out eradicates the poverty trap by eliminating the work disincentives created by phasing out the benefit.215 Second, removing the phase-out dramatically simplifies the administration of a benefit program.216

Both of these arguments in favor of a non-means-tested program apply in the case of the EITC.217 With respect to the work disincentive created by the phase-out of the EITC, first it is important to point out that the majority of EITC claimants are in the phase-out range.218 Thus—at least theoretically—the EITC should disincentivize work for many more recipients than for those whose labor participation is incentivized.219 In fact, for three quarters of all EITC recipients, the credit serves as a disincentive to earn additional income (because they are in the phase-out range) rather than an incentive, although the magnitude of the disincentive is very hard to assess.220 There is some consensus among economists doing empirical work that the phase-in of the EITC increases labor participation by single mothers, persuading some mothers who are not earning money to work in the market economy.221 But the economic literature attempting to assess the disincentive effect of the phase-out range is much more complicated and does not result in any clear findings.222 Therefore, it is not clear how substantial the disincentive effect of the EITC phase-out is. However, it is perfectly reasonable to assume that the EITC phase-out acts as a disincentive to work as much as a 21.6% additional marginal income tax rate would, if you assume that the phase-out and the tax are equally salient to the worker.223 The administrative simplification that comes from removing the EITC phase-out is not so impressive when discussed in isolation. The EITC is already administered through the tax code, and the information determining level of qualification is collected on an income tax return. If there was no phase-out, taxpayers would still need to collect the same information about income that they do currently, since they would still need to file a full income-tax return in order to claim the reformed EITC. The fact that they could be confident throughout the year that additional earnings would not disqualify them for EITC benefits might have incentive effects but would not really simplify filing much. At best, it might encourage some recipients to file, even if they might have avoided filing currently, because they erroneously believed that they earned too much to qualify.