Bradley Hardy: EITC Expansions, Earnings Growth, and Inequality

Mar 20, 2019

This lecture discusses the use of longitudinal administrative tax data from Washington DC (DC) to study how Earned Income Tax Credit (EITC) expansions undertaken by the Washington DC affect income and inequality in the city. We find that federal and DC EITC credit expansions between 2001 and 2009 are associated with recipient pre-tax earnings growth of roughly 3-4 percent, primarily among single mothers. Together these credits reduce post-tax inequality for the 10th percentile relative to median household, however, composition changes in the city and growing overall inequality mitigates this inequality decrease towards the end of the period. Overall, these results complement existing research that shows the EITC has a positive effect on labor market outcomes and household well-being.