How Families View and Use the EITC: Advanced Payment versus Lump-sum Delivery

Updated March 25, 2001 <p> A revised version of this paper appears as "How Families View and Use the EITC: The Case for Lump-sum Delivery." National Tax Journal 53(4) (part 2): 1107-1134. For more information see www.ntanet.org. <p> We analyze ethnographic data on 42 families? perceptions and uses of the EITC, including the decision to use the lump sum or advance payment form. A behavioral life cycle (BLC) model lends a theoretical framework and a description of family financial situations provides context. Parents discuss and exhibit a strong preference for a lump sum combined tax refund and EITC over the credit?s advance payment option. We argue that the preference aligns with the BLC model and is rational given scarce time, money and personal energy. We conclude with implications and hypotheses for quantitative investigation of labor supply and well being issues.