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EITC Expansion, Earnings Growth, and Inequality: Evidence from Washington DC

Posted: 3/30/2018 ()

Bradley Hardy, Department of Public Administration and Policy, American University

Seminar Abstract:Using administrative tax panel data for the District of Columbia (DC), we assess the combined effect of the DC supplemental earned income tax credit (EITC) and the federal EITC on earnings, income, and inequality within Washington, DC from 2001-2014. Enacted in 2001, the DC credit was expanded several times throughout the 2000s and is now the most generous of its kind in the nation. Overall, we find that the EITC in DC reduces income inequality initially. However, though the credit continues to increase in size over the period of study, this relative reduction in inequality diminishes over time among some groups. We also find that the EITC is associated with higher earnings and income. Taken together, the city’s refundable tax credit in concert with the Federal EITC helps to improve economic conditions for recipients while being directly connected to employment opportunities, yet the degree to which it may reduce post-tax inequality may be inherently limited.

Bradley Hardy is an Associate Professor of Public Administration and Policy and nonresident senior fellow in Economic Studies at the Brookings Institution. He also serves as a visiting scholar with the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis. His research interests lie within labor economics, with an emphasis on economic instability, intergenerational mobility, poverty policy, and socio-economic outcomes. Within the department, he teaches courses on microeconomics and social policy. His research examines trends and sources of income volatility and intergenerational mobility within the United States, with a focus on socio-economically disadvantaged families. He also conducts research on the role of anti-poverty transfer programs such as SNAP food stamps and the earned income tax credit for improving economic well-being among low income individuals and families. Before joining American, he served as a research fellow at the University of Kentucky Center for Poverty Research. Prior to his doctoral studies, Hardy helped provide analyses of U.S. budget, tax, and income support policies as a researcher at the Center on Budget and Policy Priorities in Washington, DC. He currently serves on the executive boards of the National Economic Association and the Society of Government Economists, and the editorial board of the Journal of Policy Analysis and Management. He is a member of the National Academy of Social Insurance.

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Date: 04/06/2018

Time: 12:30-1:30 PM

Location: 121 Raitt Hall