State Earned Income Tax Credits and the "Overpayments" Issue

Publication Date: March 2007

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Nicholas Johnson; John Wancheck; Robert Greenstein

Research Area: Banking and finance

Keywords: State budgets; Tax code; Economic projections

Type: Report

Abstract:

Overpayment reports tend to exaggerate the actual level of overpayments. In part this is because of methodological problems in the IRS studies of 1999 and 2001 upon which the current overpayment rate estimates are based. In addition, significantly improved enforcement efforts by the IRS and legislative changes enacted since 2001, the year on which current IRS estimates of overpayments are based, should have resulted in a decline in overpayments that is not reflected in the error rate estimates. Finally, as explained below, IRS’ efforts to reduce EITC overpayments are growing more effective each year, and in February the Administration submitted EITC simplification proposals to Congress that would shrink overpayments further.