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2010 Budget Tax Proposal

Eliminate the Advance Earned Income Tax Credit

Low-income workers with children may choose to receive the Earned Income Tax Credit (EITC) throughout the year as Advance Earned Income Tax Credit (AEITC). The AEITC comes as a regular addition to take-home pay through reduced withholding or, for those with too little withholding, added pay. In 2009, the maximum AEITC a family may get is $1,826. Few eligible workers opt to receive the AEITC: less than 2 percent of workers who claim the EITC on their tax returns get advance payments. Surveys indicate that most eligible workers prefer to get large refunds when they file their tax returns or worry about having to repay excess advance payments.

The president proposes to eliminate the AEITC starting in 2010 on the argument that few people use it and the program has high error rates. OMB Director Peter Orszag asserted, “This budget proposes eliminating it, not because we don't support work incentives for low- and moderate-income workers, but rather because that program simply does not work well.” (White House press briefing, February 26, 2009)

Additional Resources
Giving Up on the Advanced Earned Income Tax Credit, TaxVox, March 4, 2009
Stimulus Act Report Card: Increase in Earned Income Tax Credit
Description of Revenue Provisions Contained in the President’s Fiscal Year 2010 Budget Proposal; Part One: Individual Income Tax and Estate and Gift Tax Provisions (JCS-2-09), Joint Committee on Taxation, September 2009, pp 131-132