Question

7). The chart below illustrates the Earned Income Tax Credit (EITC) benefit received by different types of families at different levels of income. FIGURE 1 Value of federal Earned Income Tax Credit, 2014 The EITC increases as you earn more money up to a certain level, gradually decreases in value as you need it less, and varies based on one's income and number of dependents. Single: No children One child Two children Three or more children Married, filing jointly: No children One child Two children Three more children $6,000 $6,143 $5,460 $4,000 $3,305 $2,000 $496 $0 $10,000 $30,000 $40,000 $50,000 $20,000 Income level Note: Figure is for illustrative purposes only and not all values are represented. Source: Internal Revenue Service 2014 Earned Income Credit (EIC) Table (US. Department of the Treasury, 2014), available at http://apps.irs.gov app/vita/content/globalmedia/eamed_income_credit_table_10401 pdf. (1) Very briefly in a few words) describe what the EITC is. (2) Explain David Ellwood's second conundrum: Security-Work (very briefly - two sentences). (3) How does the EITC potentially 'solve' the Security-Work conundrum? At

Answer 1

(A)The Earned Income Tax Credit, EITC, is a benefit for working people with low to moderate income. It is a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children. The amount of EITC benefit depends on a recipient's income and number of children.

(B)David Ellwood's second conundrum: Security conundrum:

"Society is torn between its desire to reduce the costs of poverty (which detrimentally affect the nonpoor as well as poor) and its desire to have the poor bear the costs of that reduction" is called Security conundrum as per David.

(C)EITC solve security conundrum by providing refundable tax credit benefits to low earners. Thus it enhances their income and bring them out from poverty by supporting their families.