Federal Earned Income Tax Credit Research Articles

Measuring take-up of the California EITC with state administrative data

The Earned Income Tax Credit (EITC) is the largest cash-based means-tested transfer program in the United States. In 2021, 31 million households received $64 billion from the federal EITC. Twenty-eight states also offer eligible taxpayers a supplement to the federal program. An estimated one-fifth of eligible households fail to claim the federal credit, but little is known about take-up of these state programs. We use administrative data from California on the population of Supplemental Nutrition Assistance Program (SNAP) recipients linked to state tax records to estimate the number of households who are eligible for California’s supplement to the federal EITC (CalEITC) but do not claim it. We find that over 400,000 households who received SNAP benefits and who were eligible for the state EITC in 2017 did not receive the credit. This includes approximately 40,000 eligible households who claimed the federal EITC but not the state credit; nearly 98,000 eligible households who filed a state tax return but did not claim the state or federal credit; and roughly 270,000 eligible households who did not file a state tax return. The corresponding take-up rate for the CalEITC among eligible SNAP-enrolled households was 54%. Altogether, these households left a total of $71 million in state EITC funds on the table. If received, these credits would have increased incomes among these households by 2.7% and increased total state EITC outlays by 20%.

Potential gaps in income support policies for those in poor health: The case of the earned income tax credit—A cross sectional analysis

BackgroundThe federal Earned Income Tax Credit (EITC) is the primary income support program for low-income workers in the U.S., but its design may hinder its effectiveness when poor health limits, but does not preclude, work. MethodsCross-sectional analysis of nationally-representative U.S. Census Current Population Survey (CPS) data covering 2019. Working-age adults eligible to receive federal EITC were included in this study. Poor health, as indicated by self-report of at least one problem with hearing, vision, cognitive function, mobility, dressing and bathing, or independence, was the exposure. The main outcome was federal EITC benefit category, categorized as no benefit, phase-in (income too low for the maximum benefit), plateau (maximum benefit), phase-out (income above threshold for maximum benefit), or earnings too high to receive any benefit. We estimated EITC benefit category probabilities by health status using multinomial logistic regression. We further examined whether other government benefits provided additional income support to those in poor health. Results41,659 participants (representing 87.1 million individuals) were included. 2,724 participants (representing 5.6 million individuals) reported poor health. In analyses standardized over age, gender, race, and ethnicity, those in poor health, compared with those not in poor health, were more likely to be in the no benefit (2.40% vs. 0.30%, risk difference 2.10 percentage points [95%CI 1.75 to 2.46 percentage points]), and phase-in (9.28% vs. 2.74%, risk difference 6.54 percentage points [95%CI 5.82 to 7.26 percentage points]) categories. Differences in resources by health status persisted even after accounting for other government benefits. ConclusionsEITC program design creates an important gap in income support for those for whom poor health limits work, which is not closed by other programs. Filling this gap is an important public health goal.

The Oregon Earned Income Credit’s Impact on Child Poverty

ABSTRACT Building off the success of the federal earned income tax credit (EITC), states have developed earned income credits to supplement the incomes of the working poor. In 2016, a distinctive change to the Oregon Earned Income Credit (OEIC) targeted additional resources to families with young children. Using a unique data set and static estimates, we found that the OEIC yielded proportional decreases in child and young child poverty of 1.8 and 2.6%, respectively. By simulating alternative OEIC policies, we also found that significant increases to OEIC rates or takeup would be required to more aggressively reduce child poverty.

The earned income tax credit and food insecurity

AbstractAlthough previous work on the earned income tax credit (EITC) has established that the program improves health outcomes of people from lower socioeconomic backgrounds, not much is known about the possible pathways through which higher EITC benefits affect health. This study contributes to the literature by evaluating the role of food insecurity as a mechanism underlying the relationship between the EITC and health. Using the 2009 federal EITC expansion, which increased benefit generosity for eligible families with three or more children, I estimate difference‐in‐differences (DD) and difference‐in‐difference‐in‐differences (DDD) models to evaluate whether the policy change is associated with improvements in food security. My analysis finds that the program expansion, which increased predicted annual EITC benefits by $496, is associated with a reduction in the likelihood of experiencing food insecurity by 8.1% for low‐educated households with three children. The observed improvements in food security are larger for non‐married households, a group that has previously been shown to be strongly affected by EITC changes. An evaluation of variations in state‐level EITC laws provides further indication that more generous benefits reduce food insecurity. The results, which are robust to estimating several alternative specifications, provide evidence that higher EITC benefits improve the well‐being of low‐income households by reducing food insecurity.

Understanding Take-Up Of The Earned Income Tax Credit Among Californians With Low Income.

The Earned Income Tax Credit (EITC) is the largest poverty alleviation program for families with children in the US, and it has well-documented health effects. However, not all eligible families receive benefits. The Assessing California Communities' Experiences with Safety Net Supports (ACCESS) Study interviewed 411 EITC-eligible Californians with young children to understand low take-up of the federal EITC and California's supplemental CalEITC. Interviews were conducted in English and Spanish in 2020 and 2021 to gather information on sociodemographic characteristics, tax filing, and EITC receipt (verified via tax forms). Among those eligible for the EITC or CalEITC, 9percent of participants did not file taxes; among those who did file taxes, about 84percent received the EITC, and 83percent received the CalEITC. Lower likelihood of federal EITC receipt among those eligible and filing taxes was associated with being younger, not speaking English, and not having prior knowledge of the EITC. Lower likelihood of CalEITC receipt among those eligible and filing taxes was associated with not speaking English. These findings can inform policies and community interventions to increase EITC take-up and thereby help address health equity.

Earned Income Tax Credit and Youth Violence: Findings from the Youth Risk Behavior Surveillance System.

Family- and neighborhood-level poverty are associated with youth violence. Economic policies may address this risk factor by reducing parental stress and increasing opportunities. The federal Earned Income Tax Credit (EITC) is the largest cash transfer program in the US providing support to low-income working families. Many states have additional EITCs that vary in structure and generosity. To estimate the association between state EITC and youth violence, we conducted a repeated cross-sectional analysis using the variation in state EITC generosity over time by state and self-reported data in the Youth Risk Behavior Surveillance System (YRBSS) from 2005 to 2019. We estimated the association for all youth and then stratified by sex and race and ethnicity. A 10-percentage point greater state EITC was significantly associated with 3.8% lower prevalence of physical fighting among youth, overall (PR: 0.96; 95% CI 0.94-0.99), and for male students, 149 fewer (95% CI: -243, -55) students per 10,000 experiencing physical fighting. A 10-percentage point greater state EITC was significantly associated with 118 fewer (95% CI: -184, -52) White students per 10,000 experiencing physical fighting in the past 12months while reductions among Black students (75 fewer; 95% CI: -176, 26) and Hispanic/Latino students (14 fewer; 95% CI: -93, 65) were not statistically significant. State EITC generosity was not significantly associated with measures of violence at school. Economic policies that increase financial security and provide financial resources may reduce the burden of youth violence; further attention to their differential benefits among specific population subgroups is warranted.

Evidence for the Role of State-Level Economic Policy in HIV Risk Reduction: State Earned Income Tax Credit Generosity and HIV Risk Behavior Among Single Mothers

We investigated the impact of State-level Earned Income Tax Credit (SEITC) generosity on HIV risk behavior among single mothers with low education. We merged individual-level data from the Behavioral Risk Factor Surveillance System (2002–2018) with state-level data from the University of Kentucky Center for Poverty Research and conducted a multi-state, multi-year difference-in-differences (DID) analysis. We found that a refundable SEITC ≥ 10% of the Federal Earned Income Tax Credit was associated with 21% relative risk reduction in reporting any high-risk behavior for HIV in the last year, relative to no SEITC. We also found that a 10-percentage point increase in SEITC generosity was associated with 38% relative risk reduction in reporting any high-risk HIV behavior in the last year. SEITC policy may be an important strategy to reduce the burden of HIV infections among women with low socioeconomic status, particularly single mothers.

883-P: Associations of State Earned Income Tax Credits with Self-Reported Health Status among U.S. Adults with Diabetes, 2000–2016

Persons with low socioeconomic status are disproportionately affected by diabetes and among people with diabetes, those with lower incomes tend to have poorer health status than those with higher incomes. Few studies have examined whether policies to improve the financial status of low-income populations can improve health outcomes among people with diabetes. Using data on state earned income tax credit (EITC) policies from the National Bureau of Economic Research and self-reported health status from the 2000-2016 Behavioral Risk Factor Surveillance System (BRFSS) , we examined the association of state EITC with poor health status among United States (US) adults with self-reported diagnosed diabetes. Poor overall health was defined as self-reported general health status of “fair” or “poor” in BRFSS. Poor mental and physical health were defined as having at least 14 self-reported days in poor mental or poor physical health in the past 30 days, respectively. State EITC was defined as the state’s EITC amount as a percentage of the federal EITC. We used weighted logistic regression to model the effect of EITC variation across states and over years and calculated the marginal effects of state EITC on health status, controlling for poverty, race, education, unemployment, state gross domestic product (GDP) , state Medicaid expansion, and state minimum wage policy. Poisson regression models were conducted as a sensitivity analysis. A 10-percentage point increase in the state EITC was associated with a 3% lower rate of poor mental health status (-2,759 per 100,000, 95% CI = -5,494, -25) . The associations of the state EITC with physical health and overall health status were not statistically significant. The results were robust to choice of model based on the sensitivity analysis. Policies that increase income retained may help to improve self-reported mental health status of US adults with diabetes. Disclosure S.Tang: None. Y.Chen: None. D.B.Rolka: None. G.Imperatore: None. C.S.Holliday: None. P.Zhang: None.

The Earned Income Tax Credit and Maternal Time Use: More Time Working and Less Time with Kids?

Parents spend considerable time and resources investing in their children's development. Given evidence that the Earned Income Tax Credit (EITC) aects maternal labor supply, we investigate how the EITC affects a broad array of time-use activities, focusing on the amount and nature of time spent with children. Using 2003-2018 time-use data, we find that federal and state EITC expansions increase maternal work time, which reduces time devoted to home production, leisure, and time with children. However, for children of all ages, almost none of the reduction comes from time devoted to investment activities, such as active learning and development activities.

The Earned Income Tax Credit and Short-Term Changes in Parents' Time Investments in Children.

This study examined whether the addition of household resources via the receipt of the U.S. Earned Income Tax Credit (EITC) affects short-term patterns of parents’ time investments in children, including time spent engaged with children and in activities related to their education. Using difference-in-differences analyses that exploit seasonal variation in federal EITC outlays with nationally representative time-diary data from the 2003 to 2017 American Time Use Survey-Current Population Survey (ATUS-CPS; N = 61,355) merged with state-level data from the University of Kentucky Center for Poverty Research (UKCPR) National Welfare Database, I estimate the plausibly causal effects of predicted EITC receipt on various measures of parents’ time investments in their children. I examine parents’ time spent directly engaged with children in enriching activities like play and reading and in activities related to children’s education among a low-socioeconomic sample (parents with less than a college degree). I find few associations between monthly federal EITC outlays and immediate changes in parents’ time investments, although there was evidence that greater EITC outlays predicted small increases in mothers’ time spent reading with or to children, particularly among mothers with young children, but also small decreases in fathers’ time spent in activities with children, particularly school-age children. Findings suggest that increases in household resources, even relatively small and annual increases, may have short-term effects on parent–child interactions and time use.

State earned income tax credits and depression and alcohol misuse among women with children

About 30% of single mothers in the US live at or below the poverty line. Poverty is associated with higher risk of depression and substance use. We investigated associations between state earned income tax credit (EITC) policies and reported depressive symptoms and alcohol misuse among birthing parents who responded to Pregnancy Risk Assessment Monitoring Survey spanning 1990–2017. Nearly half of birthing parents reported no more than a high school education (45.4%; 95% CI: 45.3%–45.6%). An estimated 28.5% of birthing parents reported binge drinking in the three months prior to conception (95% CI: 28.3–28.8%). Among birthing parents, each 10 percentage-point increase in the generosity of state EITC relative to the federal EITC was associated with a lower prevalence of binge drinking (prevalence ratio = 0.96; 95% CI: 0.93–0.99) prior to conception. This association was more pronounced among birthing parents with no more than high school education (prevalence ratio = 0.92; 95% CI: 0.88–0.97). There was no association between state EITC and number of reported depressive symptoms prior to conception or after birth, except among those with lower educational attainment (prevalence ratio = 0.94; 95% CI: 0.89–0.99). Anti-poverty policies such as EITC may reduce the burden of alcohol misuse, especially among people with children.

Policy Proposal: Modifying the Federal Earned Income Tax Credit to Better Help Households with One or No Dependents

This paper discusses four recommendations to improve the federal Earned Income Tax Credit, (EITC), which effectively acts as a wage boost for very-low-income and low-income workers. The credit amount varies tremendously depending on the number of dependents one has. This discrepancy is the paper’s main focus. This paper finds that the EITC’s failure to significantly help taxpayers without dependents, among other challenges, limits its ability to fulfill the program’s goals of incentivizing work and reducing poverty. The four recommendations on average would expand the availability and amount of the credit for most lower-income taxpayers. A conventional economic analysis suggests that these changes would likely incentivize work for many (though not all) affected individuals, increase consumer spending, reduce poverty, and increase equity. In a somewhat limited manner, this paper recommends the set of changes for enactment.

The Labor Market Effects of State and Local Expansions of the Earned Income Tax Credit

This study analyzes the labor market impact of state and local supplements to the federal Earned Income Tax Credit (EITC) program. Using Current Population Survey data from 1984 to 2020, I examine the differential impact of the state and local government supplements of the EITC on the labor force participation rates of married women. I examine whether the substantial expansions in the EITC program created by these supplements are an effective means of providing work incentives. In particular, do states and local counties with an EITC supplement witness higher female labor force participation rates? Exploiting variation in the policy over time both across states and within states between different demographic groups, I analyze whether the EITC supplements have raised labor supply among single women, and whether such differences exist in the labor supply of married women.

The impact of state earned income tax credit increases on material and medical hardship

AbstractThe federal Earned Income Tax Credit (EITC) provides substantial financial assistance to low‐ and moderate‐income workers and has been shown to reduce poverty and encourage employment. Many US states have also implemented their own EITCs to supplement the federal tax credits. Leveraging unique administrative and survey data and employing a difference‐in‐differences approach, this study investigates how changes in state EITC benefits between 2012 and 2016 impacted the levels of material and medical hardships in states that expanded or enacted state credits. We find that small changes in state EITC levels can alleviate medical hardship, but not most other types of hardship, especially when states experience a greater benefit increase or implement new state EITCs. Our research points to the limitations of using relatively modest tax credits to offset many of the economic challenges faced by low‐ and moderate‐income households.

Ten years later: Self‐sufficiency of welfare mothers before the Great Recession

AbstractThis paper presents a preliminary evaluation of the Temporary Assistance to Needy Families program, that was mandated by the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), showing trends over time in wages for mothers who received welfare benefits in 1996, using the power of a longitudinal data set: a nationally representative sample of 1000 welfare mothers in the 1996 Survey of Income and Program Participation (SIPP), linked to their IRS wage records from 1996 to 2007. Only one in ten of the 1996 cohort of welfare mothers received wages that were at least 175% of the poverty line by 2007. By 2007, only one in six of those with more than a high school diploma achieved this level of economic self‐sufficiency. For all time periods, the federal Earned Income Tax Credit, had a positive impact for only the lowest wage earners, that is, with earnings below half the poverty line. Our results provide a commentary on the validity of neoliberal assumptions underlying the long‐term implementation of the PRWORA. Analyses of future SIPP panels will determine whether these trends continued.

Employment Effects of the Earned Income Tax Credit: Taking the Long View

The earned income tax credit (EITC) is the cornerstone US anti-poverty program for families with children, typically lifting millions of children out of poverty each year. Targeted to low-income households with children and only available to those who work, the EITC contains strong incentives for nonworkers to become employed. Most of the existing economics literature focuses on federal EITC expansions in the 1980s and 1990s. This paper takes a longer view, studying all federal expansions since the program’s inception in 1975. We find robust evidence that EITC expansions increase the extensive margin of labor supply.

Anti-poverty policy and health: Attributes and diffusion of state earned income tax credits across U.S. states from 1980 to 2020.

The U.S. federal Earned Income Tax Credit (EITC) is often considered the most effective antipoverty program for families in the U.S., leading to a variety of improved outcomes such as educational attainment, work incentives, economic activity, income, and health benefits for mothers, infants and children. State EITC supplements to the federal credit can significantly enhance the magnitude of this intervention. In this paper we advance EITC and health research by: 1) describing the diffusion of state EITC policies over 40 years, 2) presenting patterns in important EITC policy dimensions across space and time, and 3) disseminating a robust data set to advance future research by policy analysts and scientists. We used current public health law research methods to systematically collect, conduct textual legal analysis, and numerically code all EITC legislative changes from 1980 through 2020 in the 50 states and Washington, D.C. First, the pattern of diffusion across states and time shows initial introductions during the 1990s in the Midwest, then spreading to the Northeast, with more recent expansions in the West and South. Second, differences by state and time of important policy dimensions are evident, including size of credit and refundability. Third, state EITC benefits vary considerably by household structure. Continued research on health outcomes is warranted to capture the full range of potential beneficial effects of EITCs on family and child wellbeing. Lawyers and policy analysts can collaborate with epidemiologists and economists on other high-quality empirical studies to assess the many dimensions of policy and law that potentially affect the social determinants of health.

The long-term effects of childhood exposure to the earned income tax credit on health outcomes

The Earned Income Tax Credit (EITC) is a central component of the U.S. safety net, benefiting about 25 million families. Using variation in the federal and state EITC, this paper evaluates the long-term impact of EITC exposure during childhood on the health of young adults. We find that an additional $100, or a 3% increase, in the average annual EITC exposure between birth and age 18 increases the likelihood of reporting very good or excellent health by 2.6% and decreases the likelihood of being obese by 4.1% between ages 22 and 27. The effects of EITC exposure are stronger for children raised in a single-parent household and for children with lower-educated parents.

State Earned Income Tax Credit policies and intimate partner homicide in the USA, 1990-2016.

Economic insecurity is a risk factor for intimate partner homicide (IPH). The Earned Income Tax Credit (EITC) is the largest cash transfer programme to low-income working families in the USA. We hypothesised that EITCs could provide financial means for potential IPH victims to exit abusive relationships and establish self-sufficiency. We conducted a national, quasiexperimental study of state EITCs and IPH rates in 1990-2016 using a difference-in-differences approach. The national rate of IPH decreased from 1.9 per 100 000 adult women in 1990 to 1.3 per 100 000 in 2016. We found no statistically significant association between state EITC generosity and IPH rates (coefficient indicating change in IPH rates per 100 000 adult female years for additional 10% in amount of state EITC, measured as the percentage of federal EITC: 0.02, 95% CI -0.03 to 0.08). Financial control associated with abuse and current EITC eligibility rules may prevent potential IPH victims from accessing the EITC.

Credit where it is due: Investigating pathways from earned income tax credit expansion to maternal mental health.

While earned income tax credit (EITC) expansions are typically associated with improvements in maternal mental health, little is known about the mechanisms through which the program affects this outcome. The EITC could primarily affect mental health through changes in family financial resources, changes in labor supply or changes in health insurance coverage of participants. We attempt to disentangle these mechanisms by assessing the effects of state and federal EITC expansion on mental health, employment, and health insurance by maternal marital status. We find that federal EITC expansions are associated with improved self-reported mental health for all mothers and large positive effects on employment for unmarried mothers. State EITC expansions are associated with improvements in mental health for married mothers only and have no effect on employment for married or unmarried mothers. Overall and for most subgroups of mothers, we find little association between EITC expansions and changes in health insurance coverage. These findings suggest that while EITC expansions improved mental health for unmarried mothers through a combination of the credit and employment effects, for married mothers, improved mental health is driven through the direct credit alone.