We examine the relationship between the earned income tax credit (EITC) and Black-White after-tax income inequality from 1980 to 2020. The EITC lowers overall inequality by 5– 10 percent in a typical year, improving the incomes of Black households relative to White households in the bottom half of the distribution. Gains in relative economic status emerged after the 1993 EITC expansion, concentrated among working-class Black households, and not extending to those at the very bottom. Estimating the effect of the 1993 expansion on labor supply, we find evidence of a much larger extensive-margin employment response for Black households than White households.
|Number of pages||19|
|Journal||National Tax Journal|
|State||Published - Mar 2022|
Bibliographical noteFunding Information:
We thank the WorkRise Network for providing financial support. We also thank Laura Kawano, Joel Slemrod, and session participants at the 2021 National Tax Association Annual Conference for helpful feedback. The views expressed in this article, including those related to statistical, methodological, technical, or operational issues, are solely those of the authors and do not necessarily reflect the official positions or policies of the US Census Bureau.
© 2022 National Tax Association. All rights reserved.
- after-tax income
- labor supply
- racial inequality
ASJC Scopus subject areas
- Economics and Econometrics