Chapter 7 identifies a conundrum of the EITC: It is intended to lift low-income individuals out of poverty, yet the credit is subject to capture by a number of creditors and agencies. Because it is delivered as a tax refund, the amount due to the taxpayer can be offset against outstanding federal and state tax liabilities, past-due child support, and federal student loan liabilities. The possibility of such offset betrays its function as an antipoverty supplement. Low-income families are subject to various economic stressors and are likely to have outstanding debts. In reconfiguring the credit into two distinct elements – an incentive to work and an antipoverty supplement – Congress might consider whether the latter should be protected from offset or garnishment (in whole or in part) in order to better serve its purpose. This chapter considers the pros and cons of such a protection, and proposes some possible structures.

Chapter 6 makes the case for periodic delivery of the EITC. Returning to the Advance Earned Income Tax Credit as a failed experiment in periodic delivery, the chapter describes the advantages of periodic payment, outlines the pros and cons of different possible periodic payment structures, and identifies challenges that would arise in a transition from lump sum to periodic distribution. It describes how decoupling the credit from income tax return filing would reduce low-income taxpayer reliance on unfavorable borrowing practice and remove the incentives for return preparers to engage in misbehavior. It also proposes ways that the IRS might improve its procedures for verifying benefit eligibility, and the need to balance that with an application process that is simple for taxpayers to understand.

The Introduction explains that the EITC is a largely successful social program, but one that can be improved upon as part of a broader effort to address poverty in the United States. It provides a roadmap for the book, identifying some of the challenges taxpayers face and summarizing why the time is right for a reimagination of the EITC. It outlines potential benefits of the reimagination, such as a more coherent tax policy, a simplified structure for family benefits, a reduction in opportunities for tax return preparer fraud and tax-related identity theft, and a periodic distribution of benefits.