Final answer:
The Earned Income Tax Credit (EITC) assists low-income workers by providing a tax credit that increases with earned income, up to a certain level, to incentivize work and reduce poverty. For the 2021 tax year, the credit amount ranged from $1,502 to $6,728, tailored to the recipient's circumstances. It is neither a tax on low-income workers nor a benefit for the wealthy.
Step-by-step explanation:
The Earned Income Tax Credit (EITC) is a federally provided financial boost for working low-income individuals and families, designed to help reduce poverty and encourage employment. Introduced in 1975, the EITC functions by offering a tax credit that increases as the recipient earns up to a certain income level, thereby incentivizing work. For the 2021 tax year, the credit amount could range from $1,502 to $6,728 depending on the filer's income, number of children, and marital status. A single parent with two children, for instance, could receive a credit of $5,980.
It is important to note that the EITC does not apply to wealthy Americans, nor is it a tax on low-income workers. Instead, for working individuals and families earning above the poverty level, the credit gradually phases out, serving as a potential partial disincentive to work for those who are near-poor.