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denis and debbie are married and file jointly. they have two children, ages 10 and 12, that qualify for the child tax credit. their 2022 agi for the current year is $142,000. the amount of their child tax credit is $

User Emfurry
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Final answer:

The Earned Income Tax Credit (EITC) supports low- to moderate-income earners by reducing taxes and incentivizing work. The credit increases with income until a threshold, then remains constant, and phases out slowly to prevent a poverty trap and maintain work incentives. It is a crucial tool for reducing poverty and encouraging work among low-income families.

Step-by-step explanation:

Understanding the Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) is designed to aid low- to moderate-income working individuals and families, particularly those with children. The objective of the EITC is to reduce the tax burden on these individuals and to provide an incentive to work. The EITC amount increases with rising income until it reaches a maximum level, after which it remains steady and then gradually phases out. This structure prevents a poverty trap where earning additional income could result in a loss of benefits that equals or exceeds the extra income.

For instance, for a single parent with two children in 2013, the credit increased with each dollar earned up until the income level of $17,530. The amount of EITC was highest at this point and began to decrease gradually for every dollar earned beyond this threshold. The reduction was done at a slow rate, specifically 21.06 cents for every additional dollar earned, in order to mitigate the disincentive to work that a steeper decline might cause.

Such a system ensures that beneficiaries of the EITC are still motivated to increase their income without fear of losing financial support abruptly. It balances the need to provide assistance with the urge to maintain work incentives. Consequently, the EITC continues to be one of the most effective tools in fighting poverty and encouraging employment amongst low-income families in the United States.

User Mangusto
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