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The Effect of the EITC in the District of Columbia on Poverty and Income
November 30, 2016 @ 12:00 pm - 1:30 pm
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Using unique longitudinal 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 poverty and income within Washington, DC from 2001 to 2013. The EITC in DC merits investigation, as the DC supplement to the federal credit is the largest in the nation. The supplemental DC EITC was enacted in 2000, and has been expanded from 10 percent of the federal credit in 2001 to 40 percent as of 2009. To implement the study, we estimate least squares models with 0/1 dependent variables to estimate the likelihood of net-EITC income above poverty and near-poverty thresholds. We also estimate the likelihood of income growth from the EITC. To identify the effect of the EITC, we exploit time series variation in the city-wide EITC as well as a federal EITC subsidy rate changes from 2008 to 2009. The structure and richness of our data enable us to control for tax filer fixed effects, an important innovation from many previous EITC studies. Overall, we find that the combined EITC raises the likelihood of net-EITC income above poverty and near poverty, with the largest consistent effects accruing to single-parent families.