Gentrification in major cities has led to concerns that poor and nonwhite residents are being displaced. This paper uses administrative data on tax filing households in Washington DC to examine the potential role that increases in the Earned Income Tax Credit (EITC) plays in the location choices of the working poor. Its principal findings suggest small effects of the EITC on move decisions. Married households with dependents who received increased EITC payments are slightly more likely to remain in gentrifying neighborhoods. By contrast, single parent filers receiving EITC payments are more likely to exit these neighborhoods.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in ABSTRACTUsing 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 dynamics within Washington, DC, from 2001 to 2011. 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 earnings growth and income stabilization from the EITC. To identify the effect of the EITC, we 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 or more dependent children, up from 40 percent in the previous year for workers with two or more children. We also estimate a model examining the impact of city-level changes to the EITC. 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 by as much as 9 percent, with the largest consistent effects accruing to single-parent families. JEL Classification Codes: I32, I38, H24, J38

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in ABSTRACTUsing 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 dynamics within Washington, DC, from 2001 to 2011. 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 earnings growth and income stabilization from the EITC. To identify the effect of the EITC, we 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 or more dependent children, up from 40 percent in the previous year for workers with two or more children. We also estimate a model examining the impact of city-level changes to the EITC. 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 by as much as 9 percent, with the largest consistent effects accruing to single-parent families. JEL Classification Codes: I32, I38, H24, J38

The main objective of this article is to empirically examine the short and long-run relationship between real tax revenue and real local government expenditure as well as investigate the relationship between real sales tax revenue and real individual tax revenue and selective variables in Washington, D.C. for the period ranging from 1984-2015. The study uses the Johansen co-integration techniques as well as the bivariate and multivariate vector error correction model (VECM). The results indicate that there is a unidirectional and one-way causality running from real local government expenditure to the real DC’s tax revenue in the short and long-run, but not vice versa. The finding indicates that DC’s tax revenue changes local government expenditure. As a result, budget deficits can be avoided by implementing policies that stimulate DC’s tax revenue. The Granger-causality test shows that DC resident employment does affect real individual tax in the short and long-run, simultaneously. The Granger-causality test shows that DC resident employment, household’s population and stock of housing does affect real sales tax revenue in the short and long-run simultaneously. Furthermore, the results of the impulse response function (IRF) indicate that household’s population and stock of housing are the major short-run effect on the real individual income tax and real sales tax revenue.

The District of Columbia will increase its minimum wage to $15 per hour in 2020. The city also provides a local refundable earned income tax credit (EITC) equal to 40% of the federal EITC. Using a computable general equilibrium model, the authors estimate the economic impact of the $15 wage policy. They also use a tax policy microsimulation model to estimate how the city’s EITC interacts with a higher minimum wage. Overall, the authors find that the higher minimum wage will produce significant income gains for most of the city’s low-wage workers, with relatively few job losses. Additionally, they forecast that most city EITC recipients will receive a lower EITC, but higher earnings more than offset the reduced tax credit. The model predicts that this policy change would largely be funded by higher consumer prices, lower firm profits, and higher business productivity. These predictions are subject to important caveats, including a local labor market that is likely inadequately characterized in a model assuming perfect competition. Economic policy makers should therefore use such modeling approaches as a powerful but ultimately imperfect tool.