The Effect of the District of Columbia Supplemental EITC on Poverty, Employment, and Income Growth
Early Career Research Award
This proposed study uses restricted-access internal tax data to assess the combined effect of the District of Columbia (D.C.) supplemental earned income tax credit (EITC) and the federal EITC on poverty, employment, and income growth within Washington, D.C. from 2001-2012. The supplemental D.C. EITC has existed since 2001, and has expanded from 10 percent of the federal credit to 40 percent as of 2009. The results of this study will inform other states and regions seeking policy solutions to provide upward economic mobility for workers with stagnant wages, many of whom lack the higher education needed to find and maintain higher paying employment opportunities. To implement the study, I will estimate least squares and maximum likelihood models with 0/1 indicator variables for poverty, employment, and between year income change beyond thresholds of 10, 20, and 25 percent. To identify the marginal effect of the EITC, I will exploit variation in the EITC subsidy rate from 2008 to 2009, when an additional EITC bracket of 45 percent was added for workers with three children, up from 40 percent in the previous year. I will supplement the D.C. internal tax data with census tract-level data on economic and demographic characteristics, including racial/ethnic composition, average education and income, measures of the local economy, and spending on poverty programs such as cash assistance and food stamps. I will also include time period controls for each year in the data from 2001 – 2012 accounting for secular trends unrelated to EITC policy.