The impact of the Earned Income Tax Credit (EITC) on working families was analyzed. The analysis established that the EITC is, on balance, a highly effective program that meets its primary objectives well. The following benefits of the EITC were identified: (1) it reduced the poverty rate in 1999 by an estimated 1.5 percentage points; (2) it is preferable to the minimum wage as an income-transfer policy for poor households; and (3) it has increased many groups' labor force participation. These emerging problems with the EITC were identified: (1) it penalizes work among workers with incomes at the high end of the EITC schedule; (2) it imposes substantial financial marriage penalties; (3) it still leaves larger families with low-wage workers in poverty; and (4) its eligibility criteria are needlessly complex. The following reforms were proposed: (1) reduce EITC's current phase-out rate for families with two or more children from 21.06% to 15.98%; (2) establish a more generous EITC schedule for married couples; and (3) provide a more generous rate schedule for families with three or more children. (Sixty-two tables/figures are included. Appendixes present information about the EITC's algebra, effect on labor supply, cost-effectiveness, and variations on proposed EITC reform. The bibliography lists 85 references.) (MN)