The Interaction of Metropolitan Cost-of-Living and the Federal Earned Income Tax Credit: One Size Fits All?

Katie Fitzpatrick and Jeffrey Thompson

National Tax Journal, 2010, vol. 63, issue 3, 419-45

Abstract: This paper explores the interaction between the federal Earned Income Tax Credit (EITC) and the cost-of-living faced by single mothers. After the 1993 EITC expansion, we identify up to an 8 percentage point increase in labor force participation for single mothers in the lowest cost areas but no discernible response in the highest cost areas. We conclude that the EITC’s welfare-enhancing properties are undermined by the interaction of the program’s fixed national rules and geographic variation in wages and the cost-of-living. In addition, our findings suggest that the EITC does little to reduce joblessness in many of the nation’s largest cities.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ntj:journl:v:63:y:2010:i:3:p:419-45

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