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Title: When National and Local Policies Class: How Seattle's Increase in Minimum Wage Could Affect EITC Eligiblity
Citation Type: Journal Article
Publication Year: 2014
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Abstract: In this paper, I analyze how a substantial increase in Seattles minimum wage now the highest in the US will affect workers eligibility for the EITC. I find that the benefit of a $15 per hour minimum wage is partially offset by the resulting EITC changes. That is, despite generous EITC parameters, I estimate that the higher minimum wage will shift 36 percent of EITC recipients in Seattle out of eligibility, including 10 percent of whom were originally in the phase-in and plateau regions of the EITC schedule. I also provide the demographic characteristics of individuals who were shifted around and out of eligibility and calculate the net gains of all EITC recipients. I find that after the minimum wage increase, among those who were not shifted out of eligibility, the credit amount was unchanged for 16.7 percent, higher for 31.6 percent and lower for 51.6 percent of recipients. Shifts in EITC eligibility are important because workers in different regions of the EITC face different effective marginal tax rates, which in turn can influence labor supply decisions.
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Authors: Alvarez, Kyung Nahiomy
Periodical (Full): Cornell Economic Society: The Visible Hand
Issue: 1
Volume: 23
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Data Collections: IPUMS USA
Topics: Poverty and Welfare
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