Improving fiscal accountability of tax expenditure: the case of the Earned Income Tax Credit in Korea

2021 ◽  
pp. 118-135
Author(s):  
YoungWook Lee
Keyword(s):  
Income Tax ◽  
Earned Income Tax Credit ◽  
Tax Credit ◽  
Earned Income ◽  
Tax Expenditure

scholarly journals the General Equilibrium Incidence of the Earned Income Tax Credit

2021 ◽  
Author(s):  
C. Luke Watson
Keyword(s):  
General Equilibrium ◽  
Income Tax ◽  
Earned Income Tax Credit ◽  
Partial Equilibrium ◽  
Tax Credit ◽  
Wage Subsidies ◽  
Earned Income ◽  
Tax Expenditure ◽  
Prior Analysis

The Earned Income Tax Credit is a $67 billion tax expenditure that subsidizes 20% of all workers. Yet all prior analysis uses partial equilibrium assumptions on gross wages. I derive the general equilibrium incidence of wage subsidies and quantify the importance of EITC spillovers in three ways. I calculate the GE incidence of the 1993 and 2009 EITC expansions using new elasticity estimates. I contrast the incidence of counterfactual EITC and Welfare expansions. I quantify the effect of equalizing the EITC for workers with and without children. In all cases, I find spillovers are economically meaningful.

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