Structure
The EITC is the largest poverty reduction program in the United States. Almost 21 million American families received more than $36 billion in refunds through the EITC in 2004. These EITC dollars had a significant impact on the lives and communities of the nation's lowest paid working people, lifting more than 5 million of these families above the federal poverty line..

Impact
It is difficult to measure the cost of the EITC to the Federal Government. At the most basic level, federal revenues are decreased by the lower, and often negative, tax burden on the working poor for which the EITC is responsible. In this basic sense, the cost of the EITC to the Federal Government was more than $36 billion in 2004.
At the same time, however, this cost may be at least partially offset by several factors: 1) any new taxes (such as payroll taxes paid by employers) generated by new workers drawn by the EITC into the labor force, 2) any reductions in entitlement spending that result from individuals being lifted out of poverty by the EITC (the poverty line is sometimes a watermark for eligibility for state and federal benefits), and 3) taxes generated on additional spending done by families receiving earned income tax credit. 4) Not to mention a potential reduction in crime and other more indirect factors.

Cost
Millions of American families who are eligible for the EITC do not receive it, leaving billions of additional tax credit dollars unclaimed. Research by the Government Accountability Office (GAO) and Internal Revenue Service indicates that between 15% and 25% of households who are entitled to the EITC do not claim their credit, or between 3.5 million and 7 million households.
The average EITC amount received per family in 2002 was $1,766. Using this figure and a 15% unclaimed rate would mean that low-wage workers and their families lost out on more than $6.5 billion, or more than $12 billion if the unclaimed rate is 25%.
Many nonprofit organizations around the United States, sometimes in partnership with government and with some public financing, have begun programs designed to increase EITC utilization by raising awareness of the credit and assisting with the filing of the relevant tax forms.
In addition, the EITC is a major driver for the walk-in, storefront tax industry, which includes such well-known companies as H&R Block, Jackson Hewitt, and Liberty Tax. These companies frequently offer loan products such as Refund Anticipation Loans ("RALs"). Such loans have been criticized for being over-promoted and for such practices as "cross-collection." [1] [2] (The loans are sometimes not as easy to be approved for as the advertising implies. Customers denied the next-day loans are then required to accept the two-week loan products, in which they still end up paying the bulk of the fees. "Cross-collection" occurs when the loan-issuing bank, such as Santa Barbara Bank & Trust or HSBC in recent years, engages in debt collection for other companies, notably credit card companies. This practice is often not adequately disclosed.)

EITC and United States Military Servicemembers

Taxation in the United States
Speenhamland system
Guaranteed minimum income
Negative income tax