This paper uses the political history and pre-history of the EITC to describe how the politics of welfare reform influence tax policies that function as social policy. It suggests that the economic tradeoffs inherent in the formulation of tax-transfer programs are also political tradeoffs. It examines policy choices between costs and labor supply incentives, as well as those between ease of participation and compliance rates. This paper concludes that although economic analysis influenced the creation and development of the EITC, political factors, not economics, animated the history of the program. (author abstract)