Combining Unemployment Insurance and the Earned Income Tax Credit

Karl Widerquist, Resident Research Associate

The Jerome Levy Economics Institute of Bard College

This paper discusses how Unemployment Insurance (UI) and the Earned Income Tax Credit (EITC) can be combined into a unified employment-income maintenance system. This paper also discusses the advantages and disadvantages of doing so. A combined system would make monthly or weekly payments to persons that meet the criteria for either UI or EITC. A person who becomes eligible for Unemployment Insurance remains eligible for the same number of weeks whether or not she finds a job in that period of time, but her benefits are phased out as she earns more private income, just as EITC benefits are phased out after a recipient earns a certain amount of private income. A combined program would allow EITC recipients the advantage of receiving frequent payments rather than waiting until they file their taxes to receive assistance (at which time they may not be in as great a need). The combined system will give UI recipients a greater work incentives than the current UI system, and it will help to streamline government and reduce administrative costs of the two programs.