Refundable credits give rise to fraud schemes like day follows night. When you can get a check just for making up numbers and sending a form in, that's irresistable to scammers. A plea agreement in an Iowa case shows how it's done; The Des Moines Register reports:

Records show Denise Brown, whose age and hometown were not available, signed a plea agreement last week acknowledging she made false statements to an Internal Revenue Service investigator in 2010 and committed perjury in front of a grand jury.

...

On her own tax returns for 2009, Bailey falsely claimed she had personal income for operating an 'interior decorating' business to increase the amount she received under the Earned Income Tax Credit. She told the IRS that Brown and others were customers.

 

You just invent a little schedule C income, and in comes the government money. The IRS fights it mightily, but inevitably billions of dollars in scammed tax credits will be issued. The current effort to nearly triple the Iowa earned income credit -- from 7% of the federal credit to 20% -- won't help.