Over the past two decades, a wage subsidy operating through the tax system called the Earned Income Tax Credit has developed into America’s biggest program specifically dedicated to lifting low-income citizens out of poverty. Many Republicans as well as Democrats support this tax subsidy, which goes to people who work for modest wages. The extra money helps to reduce deprivation among poor families with children—something liberals very much want to do—yet it is the opposite of the sort of no-strings-attached “handout” that conservatives often decry.

As a tool to reduce poverty, the Earned Income Tax credit has a lot going for it. But it also has important limitations. The credit can be improved, and other programs are needed to help poor people find and hold jobs. more...