Federal policy

Income Inequality, Race, and the EITC

March 29, 2022
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In this study, researchers examined the role of the earned income tax credit (EITC) in reducing racial income inequality between Black and white households from 1980 until 2020.  Published in National Tax Journal, the study finds that the 1993 expansion of the EITC reduced income inequality among Black and white households in the lower half (25th to 50th percentile) of the income distribution through a significant employment response from Black households. Yet, the study also finds the EITC was not as effective in reducing income inequality among very low-income households (those at the 10th percentile or below of the income distribution), underscoring the need for eliminating discrimination and other systemic barriers to opportunity, income support policies that aren’t conditioned on work participation, and greater outreach to encourage take-up of the EITC among low-income families.