Bradley Hardy: EITC Expansions, Earnings Growth, and Inequality

Well good afternoon and welcome everyone
my name is Barry Rabe I'm a professor

here at the Ford school and I the
director of close-up the Center for

local state and urban policy which was
one of the co-sponsors of today's event

I want to begin by thanking my colleague
bonnie roberts for all of her hard work

as always in organizing this event and i
also want to acknowledge our co-sponsors

poverty solutions where we recognize the
very exciting things that are going on

under loop Schafer's leadership and the
opportunity to work more and more in

collaborative ways
I want to thank Luke the director of

poverty solutions and our Ford school
students Omar Ansari and Ryan Ridge zero

or zero excuse me who will sort through
questions that you can submit the

notecards to our speaker after his talk
we've reserved about 25 minutes at the

end of the session for Q&A we want to
have good discussion after what I'm sure

will be a very interesting presentation
so please write any questions that you

have on three about three by five cards
and staff will begin picking those up in

about half an hour so just be mindful of
all of that yeah we do a number of

events here at Ford and close-up has
done a fair number over the years as

well for a long time I really felt on
today find some way to focus a bit on

the unique governance circumstances of
our nation's capital Washington DC not

quite a city not quite a state but with
interesting interesting policy issues

and questions and I've often wanted for
us to find as a center ways to engage

the topics related to the Earned Income
Tax Credit particularly sub federal

variations and versions of it an issue
that has become even more ripe for

conversation in this state since
Governor Whitmer proposed substantial

changes to the Michigan AITC through was
probably better known proposals to

elevate the Michigan gasoline tax to the
highest rate in the US lots of reasons

to think about talking about these two
issues et Cie at the sub federal level

but also a Washington DC
context I wanted to do these things for

a long time but also for at least a few
years wanted to try to figure out

someone to get Bradley Hardy here to
give a talk so you can argue today as a

triple crown or a triple threat because
Bradley we are delighted to have you

join us Bradley is an associate
professor in the School of Public

Affairs at American University he is
currently a visiting scholar at the

Russell Russell Sage in Washington DC he
is also a non-resident senior fellow in

the economic Studies program at the
Brookings Institution and many of you

know his work he is making a real impact
across a number of areas of social

poverty policy considerations and was
just a natural person for both poverty

solutions and close up to come together
in this event on a more personal note I

actually got to meet Bradley for the
first time three years ago when I shared

an office of courtesy office I had
during a sabbatical at American

University down the hall and I realized
what an engaging thoughtful scholar he

is in every sense of that term and just
a very positive and constructive

presence and so I am just absolutely
delighted and honored to be able to

welcome and introduce Bradley Hardy
Bradley welcome okay well Barry

thank you for that introduction and
thanks to close up and poverty solutions

for for hosting me and happy to kind of
talk about this this project that I have

that's joint with Dan Mohammed and
Marcus Casey and a former student Ruta

Samudra you know my work has broadly
been thinking about the social safety

net and a lot of folks here at Ford go
to class and you're talking about these

issues here as well social safety net
but then even thinking about social

mobility what policy you know
interventions do we have and DC's been

interesting because you know as it turns
out they've been quite aggressive on

these sorts of policy interventions like
EITC but not limited to a ITC some other

interventions as well here we're focused
on the

earned income tax credit so you know
give some overview I think it's an

interesting thing because depending on
the classes you're taking or your area

of scholarship you might know a lot or a
little about the program so hopefully

we'll bring everybody up to speed
throughout the talk okay and so you know

the work relies on administrative tax
data in the city so we're grateful to

the government of District of Columbia
as well as Upjohn Institute and Russell

Sage for supporting the work and this is
kind of boilerplate that you know I'm

going to be prescriptive in here talk
about income inequality talk about a lot

of the trends we're seeing but you know
neither I nor our colleagues are

speaking for the the government or or
mayor Bowser who just released her 2020

budget in in DC and a lot of interesting
issues there related to homelessness and

and affordable housing policies so
interesting stuff going on in the city

okay so at the federal level if you're a
student of poverty policies social

welfare policy you know you'd find that
the the federal EITC it's been around

for a while but it's undergone sort of
substantial expansions throughout the

during tax reform efforts that's the

federal level the the the city enacted
its own EITC and in 2001 but it was only

would receive but it's ratcheted up over

the 2000s to equal 40 percent of
whatever federal Earned Income Tax

Credit that the father receives today
and by our estimation it makes it the

the most generous sub-national credit
there are some other states that have

something akin to 40% on the docket but
it comes with a bunch of provisions that

DC doesn't have we'll talk a bit more
about this in a couple of slides but

really you can think of the Earned
Income Tax Credit as a wage subsidy

it's just operating through the tax code
and so this is really making work pay a

bit more creating positive incentives
for folks to work in the first place and

there's been a whole battery of labor
economics and Social Policy Research

more or less showing that this subsidy
this this tax credit does in fact

incentivize work it boosts consumption
it does have quite a bit of benefit and

then interestingly you know when you
talk to people about what they think

welfare is even to this day it's quite
fascinating twenty nineteen and there

are images that many citizens have of a
very generous cash welfare state and by

and large with with maybe some some
state exceptions where there's more

generosity that hasn't been the case
since about the mid to late 1990s

standard welfare or TANF goes to a bunch
of important at times but non-cash

activities may be you know job
assistance job training even some

childcare subsidies transportation
subsidies but other states are doing a

lot of work in welfare on a marriage
promotion but oftentimes not putting

money into the cash benefit
interestingly then the Earned Income Tax

Credit is actually the largest cash
transfer that's going to go to the poor

in America so kind of a not well known
fact and you know they talk about

burying the lede one thing I would say
though is that the one policy challenge

and folks that forward would grapple
with this is that you only get this if

you're working in the first place
so you can kind of imagine that there's

a lot of benefits there's a lot of
buy-in to this program politically a lot

of different reasons people have tended
to support the federal EITC but

nonetheless this is part of a general
result that we see more and more sort of

general welfare benefits going to folks
who are maybe poor and

near poor and in many instances fewer
benefits going to folks who are in deep

poverty and so there's folks like like
Luke who've done a lot of this

interesting work thinking about folks
who are well below the federal poverty

line right so that's a that's an
interesting fact that kind of carry with

you as we move forward we want to
understand whether or not the the

city-state intervention
combined to lower inequality with the

federal EITC so you've got this DC
Earned Income Tax Credit

you've got the federal EITC that's being
received concurrently does it reduce

inequality and then we also wanted to
understand if we saw any evidence of

increased earnings and income I'm going
to focus the limited time we have here

really thinking through the the
inequality results we have and then kind

of in closing I'm going to tell you
about sort of what we're thinking about

in terms of income growth over the over
the 2000s many of you in this room will

use secondary data sets like the current
population survey Michigan's panel study

of income dynamics here we're using
actual tax return data for tax filers in

the District of Columbia and so this has
a bunch of interesting opportunities but

also some limitations and so you know we
do find pretty substantial post AITC

reduction in inequality here's the good
news but we also see some interesting

evidence that the the well-documented
transitions economically within DC are

also showing up in this data so for
those of you who aren't really familiar

with the context of the District of
Columbia we've experienced like rapid

gentrification rapid neighborhood change
the neighborhood transition and it's

really kind of a tale of of two sides
and so far as this has put quite a bit

of strain on low and moderate income
residents and I'll show you a little bit

of what this looks like in terms of the
composition of the city at the end of

the talk but then on the other hand
the improved property tax base improved

income tax base this actually allows the
city to be able to finance you know in

our view the most generous sub-national
credit so both things are happening here

so it's interesting you know I've taken
aside now it's interesting for me

talking about tax policies like yeah
it's like really exhilarating right I

love it I don't know how you all feel
but you know yeah welcome this morning I

was a little sluggish and you know you
know is that dinner but very last night

and this is not to do with taxes I said
well you know barium I starting to feel

kind of allergic reaction
I get allergies I'm swelling and stuff

like that to figure out you know what
was going on and you know I woke up this

morning and I figured it out my granddad
my mom and my dad have PhDs from

Michigan State Spartan through my I'm
allergic I didn't even know you know so

I bear with me you know I was going to
say two people two people lead with that

or in with that that's right I'm from
North Carolina so that's a whole nother

issue but okay so moving forward now
you're awake now so if you go into the

background on the ITC in the 70s there
is this larger conversation about tax

burdens on low-income workers there were
also proposals percolating around things

that look a lot like universal basic
income negative income tax experiments

and so the EITC in some sense was born
out of these conversations that sort of

said well you know at a minimum we could
we could really try to reduce this large

implicit tax on on earnings and work as
people are cycling off of welfare and

then hitting you know tax burdens that
we want to we want to know fi that and

get rid of that as a disincentive
work and so then there's been this big

literature at the federal level more or
less documenting that you know when you

use the Earned Income Tax Credit as more
or less a proxy for an income shock so

as a clever identification strategy to
kind of ask a bigger question about the

role of income in driving educational
outcomes things like this we see the

EITC does in fact promote higher
educational outcomes we see positive

effects on what we'd call extensive
margin employment so you know right now

in this country we have relatively low
and unemployment rates there's still a

lingering conversation about when people
would call the labor participation rate

so you've got folks who just aren't even
looking in the first place that's of

concern to policy makers with a
particular attention to men in many

parts of the country how do you get
people to then enter in the first place

the ITC has generally been found to be
effective at that so-called extensive

margin right so we know a lot of the
federal level and there have been great

think tanks to think hard about what's
going on in terms of poverty reduction

colleagues at the Center on Budget and
Policy Priorities they'll do a lot of

these like accounting exercises you know
count before and after the ITC how many

people are lifted above poverty but we
don't know as much at the sub-national

level again as I said at the outset
you've got quite a bit going on which

I'll try to summarize but we've seen the
federal credit have big expansions Tax

Reform Act of 1986 had a big expansion
we had another big expansion well

recently in the the Recovery Act during
the Great Recession but then concurrent

with this you've had the DC credit
enacted around 2000 2001 and then have

these kind of credit expansions
throughout the 2000s so I'll show you

this in a table but they started off at

mm - then you go to 35% of the federal

credit you know 6 and then finally 40%
of the federal credit in 2009 and and so

a lot of what we're doing in our our
studies because we've gotten some some

work done prior to this project and we
have future ideas just to kind of

understand how these expansions over the

inequality like mobility across the city
and and really just trying to do an

evaluation in a test case that might
represent where some policymakers would

want to go with a more generous credit
in their own States or even nationally

okay so what we're showing in the map
here is that over half the states have

now enacted supplemental EIT sees now
the the gold-coloured ones are not

refundable right so you know Virginia
for example they're just trying to

offset any tax burden that you have so
the the sorts of mechanisms and effects

that you know we're talking about from
the federal EITC you know you might

surmise that you don't expect that from
something that's non refundable some

local context you guys here in Michigan
to have an Earned Income Credit that's

equal to 6 percent of the federal EITC I
was having a nice conversation this

morning and close up where it came to my
attention that 6% is a relatively new

and lower level and that puts you all an
interesting company because North

Carolina my home state is to my
knowledge the the other state that

actually had any ITC but in the case of
North Carolina I think they removed it

all together and so that's this sort of
an interesting context to think about

another piece of this context we're
thinking about is that at least in prior

years you might not know this but you
know this is impressive look at all

these states that are due
the stuff on the ITC California is doing

some expansions as well
but it turns out that states can use

their their welfare TANF Block Grants
and particularly the maintenance of

effort sub component to fund the actual
stay di t sees themselves not all do it

Michigan was doing this in in previous
years and so that's just sort of an

interesting interplay to consider as we
think about earned income tax credits

alongside other state level policies
TANF minimum wages that that in some

instances you're actually drawing from
parts of that DEP that grant that Block

Grant to support this this other social
policy intervention okay

so again if you're someone who's in the
weeds of like Tax Policy Center tables

and things like that then this is a
familiar table but the main thing I'd

want to call your attention to is the
following

I told you that the the EITC
incentivizes work and so really what's

happening is that at the initial phase
in or beginning point of the EITC you

can think about this as the going from
no earnings to one dollar earned if we

looked at a maybe a single parent with
two kids the way you read this is that

earned right so a dollar earn becomes a

dollar 40 up to basically this minimum
income just beyond $13,000 at which

point this family finds themselves
receiving the maximum EITC of about

$5,500 and so like any other social
program there's some interesting

graphics by jean sterling and co-authors
they basically show that with our

programs these all have so-called
benefit reduction rates we phase out the

program program doesn't go on
indefinitely what goes up must come down

and so the program phases out at around
$18,000 again keep in mind this is tax

year 2014 you lose 21 cents of this
benefit for every dollar earned and

you'd see this same sort of phase-out in
other social programs you know snap food

stamp benefits for example right but
then importantly if we look at this last

dollar amount an interesting point here
is that for better or worse this is a

program that's hitting families that are
perhaps what we think of as near poor

moderate income but but not strictly
poor in the classic sense right so so

this is kind of how the program's
designed I think I have an interesting

little slide in the back the classic
stair-step figure for EITC I'm not

convinced that that's more or less
helpful sometimes okay so the policy

context here is that you had really
engaged nonprofit actors DC fiscal

policy institute they are kind of a
subset of the Center on Budget and

Policy Priorities
and the DC FBI was instrumental in

pushing the DC Council and the mayor at
the time Anthony Williams to enact a

state EITC and I think this context is
important your public administration and

policy students these things don't just
happen there's actual political pressure

and put forth on policymakers and so
this is just what I was talking about

before that you you see the credit
expanding over the 2000s it is worth

noting that we do now have a childless
EITC credit that's been around for a

couple years that that's also not been
evaluated also worth noting that as

we're talking about these DC level
changes throughout the tooth

thousands you know you still do have the
federal credit that's being adjusted

upward for inflation and you also have
some expansions during the Recovery Act

during the Great Recession that that
made the credit a bit more generous for

large large families right so I'm just
showing you DC policy variation but

there's other stuff going on to be sure

again some subset of the room travels
back and forth to DC quite a bit I'll

make the general conjecture that for
people who visit DC they're oftentimes

spending time in the upper northwest
part of the city that's not the entire

city though and there's a great rich
history east of the river and east of

the river I would say has greater
heterogeneity and income these are the

wards seven and eight east of the
Anacostia River and by no stretch are

those wards sort of dominated by poverty
but nonetheless the highest poverty

census tracts are situated in Ward 7 and

results that more or less confirmed that
the inequality reduction has its largest

impact actually east of the river and
some other stuff having to do with where

the the composition of EITC filers are
seen to be shifting over the period and

I think largely it kind of follows what
you might expect ok so again you know if

you put your secondary data hat on
you're thinking about drawing data on

the population of interest in this area
we've thought hard about what would sort

of be thought of as the modal poverty
population and this has traditionally

been families headed by one adult
typically that adults a woman and so we

follow in the tradition of this
literature to think hard about trying to

isolate these single parents we also
compare

two married families or married Pam
parents again it's a bit in the weeds

but for our purposes it's not a
secondary data set so we're taking tax

definitions and trying to kind of bring
them in to what we would think of in the

secondary data world so folks who are
filing as household heads are typically

these single parents and we're gonna
refer to them as such in our results and

then we're going to look at people who
are married filing jointly to additional

considerations that the research team
continues to grapple with are that we

were thinking about this as on the one
hand looking at families that stay in

the city all 14 years and then we have
another version of this data where we

allow for people to be in and out of the
sample over that time period part of the

thinking on this is that there's a whole
literature that's worried about welfare

migration more generally so if I'm
really generous in the District of

Columbia and you live in Virginia maybe
you'd move to DC to take advantage of

the more generous social policy regime
my reading of that literature is that

there's there's very weak evidence that
that's an actual problem policymakers

who I've interacted with have more so
voiced concerns about city level

policies may be including DC's emergency
shelter law basically it particularly

during cold cold weather days if you are
not housed if you're homeless you're

guaranteed some some housing benefit or
provision again I don't know that

there's actually evidence that there's
serious welfare migration there but but

nonetheless in response to this on the
one hand we we try to think about people

who are in the sample all 14 years but
there's concerns if this is kind of

overly restrictive right these are kind
of things that you think about when

you're doing this sort of research okay
so a couple thing is to kind of call

your attention to here like I just
mentioned this balance versus unbalanced

data they really are different samples
and importantly if we call attention to

the first two columns the first point to
make is that you think about mean income

and earnings that you would see at the
national level at the mean and median DC

looks quite a bit better you can see
that in the mean statistics for adjusted

gross income or earnings you got very
high earners and you could you could

start to tell stories about kind of the
lawyer lobbyists class and in DC that

that are driving up that mean relative
to what you would see in a typical

metropolitan area right it doesn't look
as distorted at the median but but

nonetheless you know we see there's
pretty stark differences here if we look

at these sample statistics for so-called
single-parent households either again

the head of household filers comparing
across groups you know the first thing

you see is that well you know in general
most filers aren't receiving much if any

AITC
but when we restrict to this kind of

sample group of interest we start to see
that you know on average federal and

city level EITC receive does start to
jump up a bit as we would expect right

but the main takeaway here is that we're
talking about a pretty advantaged sample

overall but amid a city where we've
typically had steady state poverty of

about 20 percent so there is a quite a
bit of income inequality in the city

pockets of poverty stew the river a
large worker base that does perform

services in the service economy food
service economies so on and so forth

married households really don't have
nearly as much meaningful AITC

credit levels they do you participate
but the levels tend to be far far lower

and and so this is just a sample where
if anything you know I know it's a bunch

of numbers but that's pretty big for for
a city right over $200,000 whether

you're looking unbalanced or balanced so
that's the quite affluent part of our

sample in general we also show the
sample statistics for tax filing units

that are below the the middle of the
earnings distribution and and we think

of this as an important group to isolate
mainly because when we're thinking about

some inequality reduction and I'm going
to show you some basically some rank

rank changes along the distribution
later on you'd be worried that if you're

just looking at overall any quality
reductions say the difference in income

xander nning x' between the 90th the top
of the earnings our income distribution

versus the tenth that even with a really
generous social policy intervention I

mean you know I'm showing you these
these statistics for AGI and earnings

you're not gonna move you're not going
to move the needle that much on the

maybe compare the relative performance

of EITC recipients as compared to the
middle of the earnings distribution and

again you can see that the middle and in
my own view starts to look a bit more

like America frankly you know and with
respect to AGI adjusted gross income and

earnings okay

so first off one of the things we find
just looking over the period is that the

EITC is providing something on the order
of five to six thousand dollars of

benefits if we kind of pool all the
recipients together and you know

thinking about what this means as a as a
subset of overall earnings it's it's

quite substantial and if you kind of
call some attention to this orange bar

running through as you see it getting a
bit thicker you know this is kind of

concurring with the federal credit
moving up a bit but also importantly

those city level expansions that I was
talking about earlier those are

occurring in the data as well
a similar snapshot if we focus on again

single parents I'm using the head of
household tax definition here you get

two conclusions here like I kind of
showed you before that largely the

impacted tax unit are these head of
households single parent filing units

you know there's something else I want
to mention while I'm on this slide and

it'll it'll come up a bit later I think
but while I'm thinking about it the the

tax data allow us to leverage a lot of
interesting information including across

the city we do know from the American
Community Survey current population

survey that the the modal a I T C
recipient is a black woman with children

who's working this is consistent with
the demographics of DC DC just stopped

being majority black maybe within the
last year or two it's still the largest

racial group within the city but one of
the challenges with this research

endeavor using the tax data is that on
the one hand

we have quite a bit of confidence in the
earnings and income that people are

reporting but then on the other hand we
don't have interesting demographics and

so in a lot of my work I'm using the
secondary data sets and often times I

prefer those because you know I care
about the demographics I care about

maybe the reported educational
attainment of the individuals and

families you know care about a whole
range of other issues and self-reported

characteristics that the family might
bring to the surveyor and that's that's

not contained in this data so there's
things that we can do that are nice but

there are limitations and so you know
the research team we view this as you

know we're one piece of the puzzle kind
of trying to triangulate around what's

going on in DC we can't do it with one
data set though so this is just one

piece of the puzzle here we're following
a method that Pat Bayer and Kerwin

Charles implemented and looking at
basically cross-race earnings inequality

and basically here what we want to do is
think about EW I see recipients and put

them in the bins with respect to people
who are receiving anywhere from the

smallest to the largest
EW I see credits and we want to

understand whether and how that EITC
credit move then moves them up the rank

if we were to list people from Lois
Turner to highest earner right and so in

this exercise we're doing it for our two
data sets of interest the balanced and

the unbalanced and as I was saying
before these really are different

samples and so in this case what I'd
like to call your attention to is that

for the largest di T C credit on average
you're moving people three percentile

points in the balanced panel these are
folks who are forced to live in the city

and our data kind of criteria in 14 out
of 14 years and then in the unbalanced

panel were actually moving them 5% out
points

and so you know this is non-trivial and
yet at the same time as I mentioned

before we might still think that that's
not quite the right distribution to

think about in terms of whether and how
the the EITC is moving people up that

earnings rank and so when we just cut
that sample off to be a Nadder below 50%

of the earnings distribution when we
really focus attention on folks who are

receiving the largest EITC s we see
anywhere from 5% I'll point move to 11%

I'll point move up the earnings
distribution and so again part of what

we're trying to get a feel for in this
exercise is just the different ways in

which the EITC is having this inequality
reduction right and so clearly what's

happening here then is that you have
people who are receiving generous EITC s

who are then moving a bit above people
who are just outside of qualifying for

the credit right and all the while as
you're listening to me present this it's

worthwhile considering that unlike say a
monthly cash benefit or monthly snap

benefit I haven't done my taxes yet
actually you get it at tax time and you

might get a little bit before tax time
if you use a tax preparation service but

this is lumpy and so if you're thinking
about consumption smoothing thinking

about sort of broader so well-being
implications even as I'm showing you

some I think you know important
inequality reductions it's not

necessarily clear if we prefer the lumpy
to the smooth there's been some

interesting qualitative research that's
documented the fact that in many

instances families love receiving the
credit as a lump sum that it feels like

precautionary savings it's an
opportunity to frankly feel like you did

save
some important expenses so there's been

a lot of good work in this area kind of
thinking about whether it's actually

better to think about this in some sort
of smoothed out context maybe we'll talk

about that bit more in the in the QA
okay so I'm going to show you now what

are more like sort of standard
inequality trend figures a lot of people

would put up the Gini coefficient or a
tile you know this is a bit more

transparent just comparing earnings at
the 50th of middle of the income

earnings distribution relative to the

distribution doing the 50th percentile
the earnings distribution relative to

the 25th and so if we call attention to
the to the blue trend the top one

comparing blue to orange is just
thinking about this 50 10 ratio before

accounting for the DC and federal EITC
and then after so like this is doing

what you expect it to do there's an
inequality reduction it might be a bit

subtle from the seats but the inequality
reduction starts off and holds at around

more like 12 percent by the end of the

period and then importantly you see some
evidence of some overall trend increase

in inequality occurring note 2 that the
reduction from 50 to 25 pre and post

EITC is a pretty trivial about 2% but
where we've begun to push and I think

we're gonna do more interesting work is
to kind of think about what's going on

within the city and I think there's a
lot of work that is now acknowledging

whether it's the opportunity insights
group they're not the first just

acknowledging substantial heterogeneity
or sort of diversity within an area you

know it's very need sometimes to talk
about you know

the north versus the south or you know
Durham North Carolina versus

Fayetteville where Fort Bragg is you
know actually some of the interesting

variation is within Durham County
pockets of poverty near downtown not far

from Duke University parts of suburban
Durham that are that are quite affluent

and have residents who work in the
Research Triangle Park these differences

matter in DC they matter we see
inequality reduction from the Earned

Income Credit
in what is really the more affluent part

of DC the the west part and also pool
some parts of Northeast DC but we still

see the the overall trend in curious
inequality when we compared to those

wards 7 & 8 that I highlighted at the
outset a couple things jump out first of

all in this pretty transparent measure
of inequality you learned that one

inequality is just lower overall in
these poor relatively poorer or you know

moderate income parts of the city the
post tax or post EITC inequality

reduction is also larger and sort of
absolute percentage terms as well that's

both the case for the fifty ten and the

that this was a big refundable tax
credit and in some respects this is

doing what you might expect it to do now
again another piece running in the

background is that you know I described
Ward 7 & 8 as poorer on the other hand

Ward 7 and 8 it's likely to be where
many of us in this room could afford a

house maybe if we were to try to move to
DC right now so you've got a lot of

economic transition occurring in that
side of the city and you got to be

careful painting with too wide of a
brush but nonetheless there are

certainly census tracts that have
relatively deep and persistent poverty

okay so you know I want to close out
with two additional figures here there's

a report that came out just today in the
Washington Post more or less saying what

I think a lot of us social scientists
have known which is that DC's

experienced quite a bit of neighborhood
transition and in fact it's just

heightened over the last couple of years

co-author dan Muhammad put together this
really interesting graphic and the main

point to make is that at the outset of
the Earned Income Tax Credit in 2001 you

still saw quite a bit of a ITC use in
Ward seven and eight this is a bit

subtle here but if you look at by the
end of the period what you'll notice is

that even more EITC use has moved east
of the river and so again this is kind

of consistent with what you would think
which is that if people do want to stay

in DC they are moving to the relatively
more affordable side of the city

this also has all sorts of interesting
implications about sort of geographic

access to jobs when most of you visit DC
you will stay in hotels and eat in

restaurants that are more likely to be
in the West

maybe northeastern part of the city so a
lot of the job opportunities are going

to be across town as well
so we see the shifting of low and

moderate income the last thing I'll show
you is that the likelihood of actually

receiving the EITC has dropped from
almost 20% likelihood to just over maybe

that in the overall sample a lower lower

proportion of the filing universe or
even qualifying for this in the first

place
so this is also some descriptive

evidence again it doesn't paint the
whole picture but it's certainly

consistent with the notion that just the
overall composition of the city is

changing quite a bit and it's something
to keep an eye on

this is actually an interesting one that
the team kind of wants to push a bit

further on okay so we talked about
inequality and the role of the larger

EITC as a result of DC supplement this
is just inside of $9,000 at the max back

in 2014 and I showed you that we did see
some posts EITC inequality reduction but

nonetheless it's rising throughout the
city overall in terms of some future

work that we're thinking about you know
at the outset I kind of described for

you that we really had these two stark
choices that we made for folks who are

concerned about welfare migration we
made this decision to restrict the

sample to people who were in 14 out of

be a bit too restrictive so we also have
some samples where we basically don't

impose that mobility restriction if
we're thinking about something in the

middle and I was actually talking with
Luke about this maybe it's five years

maybe it's six years in sample we're
playing with these these sorts of

decisions the other piece is that you
know we've got a series of regression

models that we've been working with for
months and months now but we've really

been thinking about hard sort of what do
we think we're picking up particularly

given the last slide that I showed you
where the composition of the city itself

is actually just shifting quite a bit
and so you know the team we've been

talking about some other approaches may
be like simulated instruments and that's

true sort of a fancy way of saying if we
could sort of take a snapshot of tax

filers and residents at the beginning of
the period and then more or less

simulate what we think they would look
like in 2014 after receiving these

benefits that might be an interesting
way to kind of think harder about what

this sort of policy is doing with
respect to income growth so that's kind

of a side from the inequality stuff I
showed you and then finally we just want

to continue to push
this sort of neighborhood context you

know that I'm telling you about and
these these maps and so not just

thinking about inequality but
differences in crime interactions with

TANF policy and minimum wages DC is also
going to a $15 minimum wage by 2020 2021

so I've got some separate work looking
at that interestingly and some of our

forecasting models we do show that the
EITC along with minimum wages is a net

net benefit you might reduce the EITC a
little bit but on balance those workers

tend to be better off overall so you
know again we're trying to push in these

directions last slide and just to kind
of consider that you know we do see an

inequality reduction here I'm a little
more circumspect about the increase in

income and I didn't even really talk
much about those models I didn't show

those a bit more circumspect there but I
think it's worth considering that you

know the EITC is quite popular sort of
on a relatively bipartisan basis if I'm

going to generalize many liberals or
progressives like it because it's sort

of a wage supplement wage subsidy many
conservatives tend to like it because it

it promotes work and only goes to people
who are working in the first place

ostensibly but how do you compete with
cities where there's really pronounced

cost-of-living issues right and in that
sense for a subset of the population

that's not really receiving much in the
way of historical earnings growth like

you know Ford grads are going to go out
and on average you're going to see a

rising earnings profile but a lot of
folks who are operating kind of at the

the lower earnings end of the of the
labor market important work but work

that's not paying as much these sorts of
supports like EITC look increasingly

permanent just kind of a permanent part
of the package that people have and then

again just a reminder that this is a
generous benefit that you have no access

to if you're not working in the first
place so it's a qualified yes in terms

of inequality reduction but in our view
with quite a few caveats so that's the

project it's it's multi-year there's a
bunch of different things we're trying

to do so you know the questions and
suggestions are are not only helpful but

they would they would enter into the
sorts of things we want to improve upon

so thanks thank you so much for coming
and speaking to us today and thank you

to close up and poverty solutions for
hosting this event

my name is Amara and I'm a graduating
master's in public policy student here

at the University of Michigan and we've
got some really interesting questions

from the audience so yeah I think we're
gonna move on to Q&A okay so the first

question that the audience has posed to
you is if you have any data on how many

tax filers who would actually be
qualified for the EITC but end up not

taking advantage of it yeah questions so
I do not have that number for the

District of Columbia but nationally
there's been some good work I want to

say it Maggie Jones yeah so Maggie Jones
has this work I'm looking at Kathy

Michael Moore who does a lot of the ITC
work also among others

but I think it's around 80% that that
actually are participating and that's at

the national level and if you think of
the EITC as a social program and that

could be your own argument it's
administered to the tax system but 80

percent looks you know quite good
relative to other other welfare programs

hi my name is Ryan Ruggiero my first
year master public policy student a next

question there's evidence of a lot of
low income workers in Michigan that they

don't know they are eligible for the
state's CITC would there be any way to

use the nudge movement to have these
people to fall into claiming the EITC

that's interesting so
you know again this is I'm gonna answer

kind of like the question I wish I was
asked here right so I think there's a

lot of people who would wonder about a
regime where we had a tax system that

really kind of automatically took care
of this for people so you know just in

general like you think about being
automated into savings a tax system

where you you weren't really having to
go in and make that that filing choice I

would say that for Michigan and the
other states there are interesting

questions about nonprofit outreach so
many of you are going to go to work and

nonprofits
many of the nonprofits in DC engage in

very aggressive outreach billboards on
buses so on and so forth free tax

preparation that that moves the needle
quite a bit on getting people to know

that they qualify for this benefit
another issue which again it's it's kind

of a splashy topic right now but to the
degree that you have people who are

engaged in it's not 1099 work
necessarily but its its contract work or

whatever the form on the you know
contract work gig economy work that is

growing I think it's easy to overstate
the degree to which that's a factor but

you do have this complexity where you
know on the one hand if you have your

your big box employer who's sending you
the forms they might even have folks who

are letting you know that you qualify
for the EITC if you're on your own you

may or may not know this be aware of it
so I think that's also kind of a running

issue those are the sorts of things
you'd want to confront to get

participation up yeah

the next question at 6% Michigan's EITC
is very small when compared with DC's

ET ITC policy just isn't even worth it

or are there other benefits to having an
AIT C policy even if it falls at a lower

rate so my own view and I think opinions
would vary here but my own view is that

I mean if the EITC is offsetting tax
liability for for low and moderate wage

workers that still seems like sensible
public policy and if you have that

architecture in place I mean I'm a fan
of the the policy so if you have that

architecture in place then it can be
ratcheted up over time right so you know

my own view is that look there's a
political economy process that we're

operating within and you guys were what

than 20 but I think it still it still
matters I do think that it starts to

raise an interesting question about a
program that's now defunct called

advanced EITC so advanced EITC was
giving filers the option to receive

their Earned Income Credit more or less
on a monthly basis my sense is that it

wasn't heavily hiked there wasn't a lot
of information about it so there's quite

a bit of low participation I mean a pin
with white brush here but it might raise

the question about whether or not at
sufficiently high or low levels do some

families then maybe prefer figure well
you know this isn't that big of a bump

at tax time maybe I do want to kind of
smooth out on the order of you know 25

bucks a month or something like that
maybe I'd rather have that so I don't

think six is too small to be meaningful
no 6 is greater than zero

in your earlier map some of the poorest
states in the country in Appalachia West

Virginia Mississippi for example it
looked like they did not have the EITC

credit at the state level do you know
why that is and as a follow up do you

have any advice or best practices you
would suggest to these states who would

want to implement an EITC or states who
would want to improve their credit yeah

so I don't know that blend well thinking
about how I want to say this I mean this

is consistent with a range of social
policies that in the labor market

context kind of skew towards being a bit
less generous so this would have a

broader conversation about sort of
unionization worker protections wage

theft minimum wages et Cie and if you
were pretty confident about this if you

to kind of run that the very
parsimonious regression on where are the

states that have higher minimum wages
above the national average states that

have supplemental EITC s the south is
going to come in as a negative there so

that's just kind of how it's been I
think that as far as guidance goes I

think that at the same time you've got
the EITC as being a relatively popular

social policy intervention look across
the ideological spectrum if you looked

at Paul Ryan's big poverty
recommendation plan from maybe 2 or so

years ago he speaks glowingly about CITC
expansions and so think what you will

about the the Ryan opportunity grants
and that idea

it does signal that among the things you
might find some support for any ITC

could have some relative traction
I guess the other point to make though

is that there's substantial
heterogeneity within the southeast and

so I mentioned here that Montgomery
County New York City they have EITC s

it's worth mentioning that their cities
that are trying to do minimum wages

there are probably cities within the
South Birmingham comes to mind that

tried to do this they actually got shot
down by the state legislature I guess I

mean to say that the tax base may or may
not be designed for a city to do this

but I do think that there's substantial
kind of diversity of thought within the

southeast such that you probably do have
quite a bit of support for this just a

matter of whether or not you can get
that done through it through a governor

and a legislature so you showed us
earlier a graph that depicted a decrease

in inequality for those who earned more
earned more because of the EITC what are

your thoughts on how it has impacted
affordability and has there been has the

gap in affordability especially when it
comes to housing and food had all been

reduced because of the EITC so I think
that in DC we don't know this is the

kind of thing that you know the research
team you want to do more work on a

subset of the team did do a study on
this back in 2016 we were specifically

trying to understand whether the
combined EITC DC and federal reduced

basically mobility out of a
transitioning neighborhood a secularly

people refer to it as a gentrifying
neighborhood and we basically found that

the answer was no the credit doesn't
seem to buffer against you know low and

moderate incomes moving out of these
these neighborhoods that are getting

more and more expensive so and I think
this is consistent with the the scale of

price increases so many of the
professorial

in Washington DC don't actually live in
Washington DC and you know housing

benefits are not an entitlement
so just because you qualify for a

voucher doesn't mean you get one and
there's big housing affordable housing

shortages in DC mayor Bowser was just
proposing to ratchet up money into the

sort of that housing assistance fund
from a hundred million to a hundred and

thirty million and while that sounds
like a big number what it translate to

translates to in terms of actual units
there's more work to be done there yeah

that's good questions our undocumented
workers eligible for a ITC and if so how

do they claim it that is a good question
that I am actually not sure about and so

that's one of those that thank you to
the audience or someone online I'm going

to go back and look into that one I mean
from the purposes of the tax office they

need a valid tax ID or social so it's
you know you can't rule out in a sense

that that this is coming to folks but
but I'm not sure yeah that's a good

question
DC recently eliminated its 60 month time

limit for TANF recipients how should the
city prioritize efforts to expand safety

net programs like TANF and the EITC
which may serve different populations

sure well I mean I think in part DC in
the other states let's let's let's

pretend DC's a state right now the DC
and the other states are also

constrained by federal TANF policy that
hasn't done much to update the size of

the actual Block Grant itself and so if
you think about what these Block Grants

look like in 1996 dollars that they've
really not gone up much if at all they

haven't had we keep on pushing TANF
reform you know down the road a bit

further right and kicking the
and so you know part of my response is

that you know part of DC's ability to do
more for its residents through these

programs is also tied to having a you
know a TANF program that kind of allows

for the resources there that said I like
the fact that relative to other states

DC tends to and my view put quite a bit
of the the Block Grant into actual cash

assistance kind of a again I was
alluding to this earlier many states

after 1996 maybe especially the late 90s
if you looked at the proportion of the

Block Grant allocated to so-called basic
assistance that's actual cash many

states went from allocating say 70 or 80
percent to basic to well under maybe

twenty fifteen percent nice work by
Marion Butler and Hillary Hoynes looking

at this and a Hamilton paper so I guess
what I'm saying is I think DC is doing

relatively well on Tanith I think
they're doing relatively well on EITC my

own opinion is that kind of the missing
link here is housing and and so this

isn't a paper about housing but the the
questioner questioner rightly notes that

how do these things all work together

there's four people here who would speak
to this even more authoritative Lee in

general we're getting out of the
business of running public housing in

the u.s. more voucher based systems many
of the low low income and affordable

housing interventions work with you know
private developers and so you get these

deals where you had a you had a plot of
land where a hundred low-income workers

had housing and with the new development
oftentimes it'll be some some sub

component of that maybe maybe thirty
maybe fifty right so you worry about

that sort of piece so you know if I had
to wave a wand I'd say big focus on

affordable housing would be key

single mothers experience meaningful
costs associated with working which as

we know is a requirement for the EITC
including transportation and especially

childcare costs which are very high is
the benefit of the EITC large enough to

offset these costs I don't think so
anyway these are like really hard

questions I don't think so though I
think that this is one of these examples

where metaphorically
you know advil is a great medicine advil

is not going to solve your broken ankle
though and sometimes like metaphorically

meaning that we push something to do
more than it's designed to do again TANF

reform we could do more on cash
assistance housing right now is not an

entitlement you could think about some
interesting proposals one from Jim's

iliac at Kentucky also a Hamilton
project paper where he proposes bumping

up food stamp benefits SNAP benefits and
he links it to higher transportation

costs that the the food basket and
calculations for how we designed snap is

really thought of in a time period when
more families poor and non poor we're

going to do more and more food
preparation at home commuting times are

probably a bit lower
I mean stylized kind of fact in DC

there's been some great kind of research
and reporting looking at you know people

who ride this popular bus line sixteenth
Street

and these are kind of second and third
shift workers and they document how

folks are taking two and even three
hours to get home in Maryland so I think

that the answer is no the EITC in my
opinion isn't enough but there's other

programs that could be beefed up to
maybe meet that need

given that the EITC necessitates that
the beneficiary work it often leaves out

people who often don't have the
resources to find work and by extension

cannot receive AITC benefits
are there ways that we can improve on a

ITC or rebrand it reframe it restructure
it so that those who consistently look

for employment opportunities but don't
find them can receive the help they need

yeah no I think that's a great question
and again you all were here as witnesses

this is not a talk about TANF but
nonetheless I do think this is another

case where cash welfare protocol welfare
program Temporary Assistance for Needy

Families that question to me really kind
of maps into things that that program

can do so for example what are the
structures in place to allow for and

provide for job training right now it's
something like typically 12 months of

Education can be counted as a work
activity and if you start to think about

some of the certificates that people
could sort of actually get into to

increase their work readiness for you
know sort of a high quality job some of

them might take a bit more than 12
months what type of safety net do we

provide for job training right now
believe it or not you don't have a lot

of coordination in all states between
what's called we OA within the

Department of Labor
they provide sort of educational

opportunities and job training for
disadvantaged workers economically

economically disadvantaged workers you
don't have a lot of coordination with

TANF in some states and you know I've
argued this in a little policy brief

from a few years ago if you think about
your own story you or maybe some of the

friends you had did benefit from
scholarships maybe family and friends

who would even provide some safety net
while you were training and upgrading

your skills maybe you have access to
student loans so I think that part of

the question about how we get people who
are not working into work involves

bringing the bear the TANF program using
that in innovative ways and there's also

been some interesting work including
some stuff out of AEI where the policy

prescriptions for TANF even include
good jobs of last resort so you know

there's been a lot of talk about federal
job guarantees among other kind of

progressive policy interventions this
isn't that but it does kind of get it

the questioners point that you know what
do you do for people who maybe are

discouraged who are like trying to work
they're having a hard time finding it so

I think it's a great question thank you
so much for all your responses today and

we have one final question what are
possible drivers of increasing

inequality starting in 2009 in the
balanced panel so I think this is

something we don't know for sure if you
think about 2009 nationally you have

kind of the core of the big economic
recession that was occurring in the

country and yet DC due in part federal
stimulus really didn't experience the

recession in that way at least in the
city and in fact he could maybe argue

that there was there were more resources
ramped up in the city at that time

period but I also think this is where a
standard economic model kind of

struggles to fully account for the fact
that you had rapid development of other

amenities restaurants housing there's
just been a broader secular move to the

city and that's not just DC that's
that's all sorts of cities throughout

the country and and so with that said
this sort of set into motion in my view

at least part of the inequality story
and so I think part of that is just a

broader move back to cities but I would
also argue that given our interest in

the inequality trends like this is
something we actually want help with and

what I understand better so it's a great
question yeah okay

I want to just thank you again and note
that we will be having to want an

additional amount at this term your
close up statement local renewable

energy policy symposium a student
Resnick podium on Monday April 29

there's more information on that in your
bulletin that said except for this party

reference I couldn't help it much for
joining us at this illuminating issue

especially as this issue really picks up
in Michigan in some very interesting

ways

thank you all