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Income Inequality, Race, and the EITC

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  • Bradley Hardy
  • Charles Hokayem
  • James P. Ziliak

Abstract

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.

Suggested Citation

  • Bradley Hardy & Charles Hokayem & James P. Ziliak, 2022. "Income Inequality, Race, and the EITC," National Tax Journal, University of Chicago Press, vol. 75(1), pages 149-167.
    • Handle: RePEc:ucp:nattax:doi:10.1086/717959
    DOI: 10.1086/717959
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    Cited by:

    1. Nicardo S. McInnis & Katherine Michelmore & Natasha Pilkauskas, 2023. "The Intergenerational Transmission of Poverty and Public Assistance: Evidence from the Earned Income Tax Credit," NBER Working Papers 31429, National Bureau of Economic Research, Inc.
    2. Margaret E. Brehm & Olga Malkova, 2023. "The Child Tax Credit over Time by Family Type: Benefit Eligibility and Poverty," National Tax Journal, University of Chicago Press, vol. 76(3), pages 707-741.

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