The federal EITC has been studied for longer than state credits, and many studies examine the combined impacts without separate analyses of state credits. Research exploring the added value of state credits, and particularly a refundable credit of 10 percent or more of the federal credit, has grown in recent years. Findings support the effectiveness of a state EITC as a policy to amplify the effects of the federal credit to improve birth outcomes and strengthen the economic security of families with infants and toddlers.
The research discussed here meets our standards of evidence for being methodologically strong and allowing for causal inference, unless otherwise noted. Each strong causal study reviewed has been assigned a letter, and a complete list of causal studies can be found at the end of this review, along with more details about our standards of evidence and review method. The findings from each strong causal study reviewed align with one of our eight policy goals from Table 1. The Evidence of Effectiveness table (Table 2) displays the findings (beneficial, null,vii or detrimental) associated with state EITCsviii for each of the strong studies (A through AAA) in the causal studies reference list. For each indicator, a study is categorized based on findings for the overall study population; subgroup findings are discussed in the narrative. The Evidence of Effectiveness table also includes our conclusions about the overall impact on each studied policy goal. The assessment of the overall impact for each studied policy goal weighs the timing of publication and relative strength of each study, as well as the size and direction of all measured indicators.
Of the 53 causal studies included in this review, 14 examined how outcomes differed by race or ethnicity (beyond simply presenting summary statistics or controlling for race/ethnicity).ix Where available, this review presents the analyses’ causal findings for subgroups by race/ethnicity and other aspects of variation, such as family structure, age, or citizenship status. A rigorous evaluation of a policy’s effectiveness should consider whether the policy has equitable impacts and should assess the extent to which a policy reduces or exacerbates pre-existing disparities in economic and social wellbeing.
Table 2: Evidence of Effectiveness for State EITCs by Policy Goal
|Policy Goal||Indicator||Beneficial Impacts||Null Impacts||Detrimental Impacts||Overall Impact on Goal|
|Access to Needed Services||Prenatal Care Use||J, Q, YY||CC||Mostly Null|
|Health Insurance Coverage||L||I, K|
|Doctor or Dentist Visit||I, K|
|Well-Child Check in First Month||YY|
|Parents’ Ability to Work||Employment or Labor Force Participation||B, C, E, L, U, W, Z, GG, LL, MM, WW, ZZ||I, S, X, Y, DD, SS, VV||Mostly Positive|
|Weeks Worked||L, U, Z|
|Work Hours (Weekly or Annual)||C, L, Z, MM||S|
|Sufficient Household Resources||Child Poverty||A, C, W, KK, ZZ||GG||Mixed|
|Earnings/Income||B, C, E, L, P, W, Z, GG, HH, MM, ZZ||D, S, VV, AAA|
|Savings Account Balance||D, PP|
|Housing Cost Burden||E|
|Housing Crowding or Doubling-Up||E|
|Evictions and Foreclosures||E|
|Public Assistance Receipt/Expenditures||Z, ZZ|
|Healthy and Equitable Births||Birthweight||B, J, Q, V, CC, II||YY||Positive|
|Gestation Weeks / Preterm Birth||J, CC, II||YY|
|Reduction in Adolescent Births||BB|
|Parental Health and Emotional Wellbeing||Mental Health / Psychological Distress||I, NN||QQ, SS||Mixed|
|Adult Suicide Rates||AA, EE, RR|
|Intimate Partner Abuse||SS||OO|
|Self-Reported Physical Health||NN|
|Self-Reported Overall Health||QQ|
|Adult Longevity||H, UU|
|Smoking / Tobacco Use||B||J, CC, QQ, YY||F|
|Alcohol Consumption||J, QQ, YY|
|Nurturing and Responsive Child-Parent Relationships||Quality of the Home Environment||JJ||Mixed|
|Parental Time Invested in Children||L, MM|
|Optimal Child Health and Development||Foster Care Entry||R||M, N||Mostly Null|
|Substantiated Maltreatment Reports||N|
|Physical Abuse Reports||N, TT|
|Abusive Head Trauma||O|
|Mental Health||L, XX|
|Long-Term Physical Health||L, FF|
Access to Needed Services
By increasing income, the EITC is expected to promote greater access to health care, including prenatal care.J However, four studiesx that examined the impact of state EITCs on the use of prenatal care found overall mixed results that did not reach statistical significance, with the exception of one study that found a negative effect.CC A 2017 study using data from 1994 through 2013 examined both the generosity and refundability of state credits and found mostly null impacts on accessing prenatal care in the first trimester, with a significant increase of 4.8 percentage points only in states with a low, nonrefundable EITCxi compared to no EITC.J A 2019 study of DC’s credit used data from 1990 through 2015 and found a reduction of approximately 7 mothers receiving first-trimester prenatal care for every 100 live births when the credit increased from 10 percent to 25 percent of the federal EITC.CC The authors posited that women may have had less time to seek prenatal care if they worked more as a result of the EITC.CC There was no significant effect of the initial implementation of the credit at the 10 percent level, or the increase from 25 to 35 percent of the federal EITC, so the reason for this result is not clear.
A third study found no significant link between New York’s EITC and prenatal care use, but the authors cautioned that this result may have been affected by missing data on this outcome for many of the zip codes involved in the study.Q In addition, the analysis was limited to New York City residents, so the results may not be generalizable to other geographic areas. A fourth study found no significant impact of the EITC on the month of a mother’s first prenatal care visit.YY This study also found null impacts on well-child visits in the first month of a child’s life.
Another study, using data from 1993 through 2016, examined the effects of greater EITC benefits on access to health coverage and medical care.I The authors found that a $1,000 increase in the maximum EITC credit did not lead to a significant change in the likelihood of being insured, but the increase did lead to a 1.1 percentage point decline in avoiding a doctor’s visit due to cost (for married mothers) and a 0.9 percentage point decrease among unmarried mothers. Interestingly, the likelihood of having visited a doctor at all in the past year did not significantly change for unmarried mothers, despite the reduction in reporting cost as a barrier. This finding indicates that other barriers (time constraints, work schedules, transportation, child care) may still prevent health care access even when income increases. When the authors investigated the effects by race and marital status, they found that among married mothers, those who were White saw no significant benefit for doctor visits, whereas non-Whitexii married mothers saw a 2.2 percentage point reduction in avoiding doctor visits because of cost (representing a boost in access). The results were reversed among unmarried mothers; for that group, White mothers saw a 1.5 percentage point reduction in reporting cost as a barrier to doctor visits, whereas non-White mothers did not see a significant effect.
A 2020 study using data from 1968 through 2017 found that a $100 increase in the maximum value of state and federal EITC benefits reduced the likelihood of being uninsured (from birth to age 18) by 0.2 percentage points.L The authors concluded that the EITC, through incentivizing mothers’ employment, has a positive impact on children’s health insurance coverage even after accounting for any potential loss in public insurance eligibility because of increased income. Results are inconsistent across studies. A 2016 study using data from 1992 through 2006 found no effect of a $100 increase in the state EITC value on the likelihood of health insurance coverage for children ages 0 to 5, and no significant impact on the likelihood of a doctor or dentist visit in the past 12 months.K The 2016 study used an older data set, analyzed a sample focused on less-educated workers, and examined state EITCs alone rather than the combination of the state and federal credits, among other differences in study design, which might account for the disparate findings.
Parents’ Ability to Work
Research on the federal EITC has found that its poverty-reduction effects can be attributed in part to an increase in women’s labor force participation.9 One of the first and most widely cited studies to establish the EITC’s effect on women’s labor force participation was a 1996 study that found that after the 1986 Tax Reform Act expanded the federal EITC, the credit was linked to a 2.8 percentage point increase in the labor force participation of single women with children relative to single women without children, from a base rate of 73 percent.10 In addition, a study with a sample of over 86,000 unmarried women estimated that the 1993 federal EITC expansion boosted the probability of working by 5 percentage points for unmarried mothers with two or more children (compared to a control group of women with no children), with the largest effects for mothers who had a high school degree or less.11 A study of the federal EITC’s effects in California found that among single parent families who had ever used welfare, the EITC had a significant positive influence on labor force participation—in particular, EITC expansions accounted for 11.8 percent of the average increase in employment from 1991 to 2000 in this population, and explained 77 percent of the difference in employment increases between families with two or more children and families with one child.12
Less research on the state EITC’s influence on labor force participation exists; most studies of state EITCs examine the effects of the combination of federal and state credits. The existing research suggests that this combination has a positive effect on women’s workforce participation, with a strong influence on single mothers with lower education levels.11,E,U
The EITC’s employment effects may differ depending upon where a family’s income falls along the benefit schedule—whether in the phase-in, plateau, or phase-out range as depicted in Figure 1. Each additional dollar of earned income garners a smaller and smaller benefit along the phase-out portion, so the incentive to work more may be weaker.
A 2020 study used data from 1989 through 1995 to examine the effects of the federal and state credits and found that among single women with a high school degree or less, a $100 increase in the maximum combined credit had a positive effect on employment.U In particular, the credit “increased the number of weeks worked in a year by 0.83 weeks and reduced year-to-year exit among single women who were previously employed by 2.5 percentage points” (p. 42).U The author suggested that the EITC may have a stronger effect on keeping individuals attached to the labor force rather than inducing new entrants into the workforce.
A simulation study examining the state credit in New York also projected a positive employment effect, but in this case, benefits were found for new entrants into the workforce. In particular, the authors used income data from 2004 and estimated that an increase in the New York State EITC from 30 percent to 45 percent of the federal credit would result in up to 21,363 single mothersxiii newly entering the workforce.W The New York credit remains at 30 percent of the federal benefit.
A 2011 study using data from 1997 through 2006 found that a 10 percent state EITC increased employment among single mothers by 2.1 percentage points compared to ineligible single women with no children,GG with a greater effect (2.9 percentage points) for single mothers with no more than a high school degree. When the authors examined Black and Hispanic mothers, the effect was similar to the overall impact (2.1 percentage points) but was not statistically significant. However, the impact on employment was greatest for Black and Hispanic mothers when the authors examined the interaction of a 10 percent EITC and 10 percent increase in the minimum wage (a 3.6 percentage point increase in employment).GG
A 2010 study using data from 1980 through 2002 found that living in a state with an EITC boosted the likelihood of mothers’ employment (for at least 1 week per year) by 19 percent,B and a 2019 study using data from 1990 through 2016 found that a $1,000 increase in the maximum EITC amount (federal and state) boosted single mothers’ participation in the labor force by between 6 and 9 percentage points.E
A 2020 study using data from 1997 through 2008 found that a 10 percent state EITC increased employment by 2 percentage points for parents who had at most a high school degree, and the presence of a state credit increased participation in the federal EITC as well.WW A second 2020 study, using data from 1990 through 2016, found that unmarried mothers with infants and toddlers (under age 3) were 9 percentage points more likely to work with a $1,000 increase in average EITC benefits (including federal and state credits).C Mothers who worked spent 3.4 more hours at their jobs each week and were 6.6 percentage points more likely to work full-time.C The study also found that for each additional $1,000 in average EITC benefits, the use of formal, center-based child care arrangements increased by 11 percentage points for infants and toddlers, and overall time spent in child care increased by 9.5 hours per week. The authors found a 20 percentage point increase in the use of informal care arrangements (e.g., neighbors, friends) relative to no increase in EITC generosity. These findings show that because the EITC can increase mothers’ time spent working, the credit also increases use of nonparental child care in various settings.
A major 2019 report by the National Academies of Sciences, Engineering, and Medicine (NASEM) estimated the extent to which various federal economic support policies may reduce family and child poverty, and two EITC policies were simulated in the study.ZZ The first policy was modeled on a proposal developed by the Children’s Defense Fund in 2015:
To increase the anti-poverty impact of the EITC, CDF increased the rate at which the credit phases in from a range of 34-45 percent (depending on the number of children) to a range of 68-79 percent. We also increased the maximum credit while keeping the rate at which the credit phases out the same (to keep marginal tax rates the same) for nearly all filer types. These changes increase the EITC for the lowest income families and somewhat lessen the marriage penalty. (p. 40)43
The NASEM analysis found that this modification of the federal EITC, with ramifications for the state supplement as a result, may boost employment by approximately 304,000 new jobs, increase net earnings by approximately $5.7 billion, and reduce child poverty by 1.2 percentage points.ZZ
Meanwhile, the second EITC policy change would boost the credit phase-in and phase-out rates by 40 percent, and this reform was estimated to increase net earnings by $9.5 billion, increase employment by 771,000 new jobs, and reduce child poverty by 2.1 percentage points. The first EITC reform would reduce net government spending on public assistance programs by $1.2 billion, and the second reform by $2.5 billion. Both EITC reforms were estimated to have the greatest poverty-reducing impacts for Black children, children with single mothers, and children with mothers under age 25 (see Table 5-1, p. 164 of the NASEM Report).ZZ
A 2021 study using data from 1990 through 2017 found that a $1,000 increase in the maximum EITC amount increased average annual weeks worked by 0.61 weeks, employment by 0.6 percentage points, and earnings by $558 among women ages 19 to 64, and this increase reduced public assistance receipt by $243 per household.Z The authors ran a number of alternative models and found that these results held true whether they defined the maximum EITC “as federal, state, or federal plus state” (p. 10).Z
Four additional studies, all published in 2020 or 2021,xiv found positive employment effects when they examined the impacts of increased state and federal credits. One of the papers found that a $1,000 increase in maximum EITC payments, including both federal and state credits, led to an increase in single mothers’ employment of 2.9 to 3.3 percentage points relative to women with no children.LL Another study found similar effects; a $1,000 increase in maximum total state and federal EITC payments was estimated to boost single mothers’ labor force participation by 4.1 percentage points, their weekly work hours by 1.6 hours, and their pre-tax earnings by $2,372 annually.MM The study also examined how greater EITC generosity affected time invested in children; results are discussed in the Nurturing Child-Parent Relationships section of this review.
A third study found that an increase of $1,000 in the maximum EITC, including federal and state benefits, did not lead to a statistically significant increase in the likelihood of employment for unmarried women with a high school degree or less in the year after their first child’s birth.VV The results were in the beneficial direction, however. Finally, a fourth study found that a $100 increase in the maximum value of state and federal EITC benefits led to small but significant employment increases for mothers: a 0.3 percentage point increase in the likelihood of mothers’ employment, a boost in annual weeks worked by 0.14 weeks, and 3.04 additional annual hours worked (with a mean of 839.4 total hours per year).L
Not all studies show positive employment impacts. A study using Census data from 2000 and 2010 compared women in Wisconsin to women in states without a state EITC and found null effects on employment,X and a study of all federal and state EITC reforms concluded that the only expansion that independently influenced employment, separate from the effects of welfare reform and other economic factors, was the 1993 federal reform.Y A study using a natural experiment method across state borders found null effects on local employment and wages, but the authors cautioned that their study did not examine poverty, which in their view is the key goal of state EITCs.DD They also speculated that the credit levels may have been too low to affect the examined outcomes, and that a county-level analysis of the entire state border, rather than just the metropolitan and urban areas, may have shown different effects.
A 2019 study using data from 1993 through 2016 found that although expansions in the federal credit were linked to increased employment for single mothers, the state credit was too small to have a significant additional effect when it was analyzed alone.I A study using data from the Fragile Families and Child Wellbeing study examined the impacts of various social welfare policies on women’s experiences with intimate partner violence, and employment was measured as a potential mechanism.SS The study found no significant links between state EITCs and women’s employment.
Finally, another study examined the impact of federal and state credits on the long-run employment and earnings of mothers when they reached age 40.S The direction and significance of results varied considerably depending on the age of children at exposure (under or over age 6) and marital status of mothers. For example, the authors found that for unmarried women with older children, a $1,000 increase in the federal credit and a $200 increase in the state credit did not have statistically significant effects on employment probability and earnings, but significantly boosted annual hours worked by 190 hours (at age 40). For married mothers, the effects were a 36.1 percent decrease in earnings and 277 fewer hours (both significant). The results were not significantly different for Black and non-Blackxv women in the authors’ analysis, but the directions of the coefficients for married Black women with young children (under age 6) were positive rather than negative as they were for married White women.
When the authors in this study examined the effects for a single year (rather than the cumulative effects from ages 22 to 39), and by age of children, they found that the credit significantly boosted earnings (by 2.2%) and annual work hours (by 15.16 hours) for single mothers with children ages 6 and older.S For mothers of younger children (including infants and toddlers), the estimates were not significant and are therefore reflected as null in Table 2 of this review.
Sufficient Household Resources
The federal and state EITCs have been shown to reduce poverty rates among low-income families, but the federal credit tends to have a greater impact on poverty than the state supplement when analyzed separately. One study found that the 1993 federal EITC expansion reduced poverty among families headed by single women by 8.4 percentage points for each additional $1,000 in the federal credit, but the effects were greatest between 75 and 150 percent of the federal poverty level, and smaller for families in more severe poverty.14 The authors suggested that the credit had a smaller effect on families below 75 percent of the federal poverty level because such families were less attached to the labor market in the first place, and the credit therefore had a weaker work-incentive effect.
Evidence shows that state EITCs contribute to poverty reduction as well, although the impact of state EITCs on earnings is more mixed. One study found that states with a refundable EITC have child poverty rates that are 40 percent lower than other states, holding other state characteristics and policies constant.A The nonrefundable state EITC, meanwhile, was not significantly linked to reductions in child poverty. This study used data from 1994 to 2003, so its results may be less applicable to current policymaking.
Similarly, a simulation study of the New York State EITC estimated that a 45 percent refund rate (increased from the current level of 30%) may lift between 68,000 and 98,000 individuals out of poverty, given the positive effects on earned income.W Child poverty was estimated to decline approximately 1 percentage point. Another study with a large, representative sample found that the state credit was associated with 32 percent higher annual earnings for mothers.B
A 2011 study using data from 1997 through 2006 found that a 10 percent state EITC was linked to a 2.2 percent increase in earnings but had no statistically significant effect on the overall likelihood of a family being above the federal poverty level.GG The study found a beneficial effect of the EITC on reducing the share of families whose earnings were below 50 percent of the federal poverty level (extreme poverty). The authors also found that the combination of a higher EITC and higher minimum wage had a powerful effect on reducing poverty: A 10 percent EITC, coupled with a 10 percent higher minimum wage (compared to the sample mean), reduced the poverty rate in single-mother families by 2.3 percentage points, and a 25 percent higher minimum wage coupled with the EITC reduced poverty by 3.4 percentage points among this group.
The authors found that although a combination of a higher EITC and state minimum wage enhanced the earnings and employment outcomes of single mothers with children, and had the greatest positive effect for families of color, this combination had an adverse effect on the employment of women with no children and on lower-educated men of color because they were more likely to be ineligible for benefits and potentially had to compete with mothers newly entering the workforce as a result of the EITC’s labor supply incentive effect. The authors underscored the importance of examining subgroup effects when assessing the effectiveness of a policy or the interaction of policies: “Whether the policy combination of a high EITC and a high minimum wage is viewed as favorable or unfavorable depends in part on whom policymakers are trying to help” (p. 712).GG
A study of the effects of EITC exposure during childhood on later economic outcomes found no significant effects of exposure during ages 0 to 5, but found significant benefits for children ages 13 to 18 on their later circumstances (a 1.3% greater chance of finishing high school, a 4.2% greater likelihood of completing college, a 1% greater likelihood of being employed, and 2.2% higher earnings for each additional $1,000 in EITC exposure).HH The study found that the EITC boosted contemporaneous family income for children ages 0 to 5: A $1,000 increase in the credit amount led to a $2,000 increase in annual pre-tax family earnings for the youngest children.HH
A study that focused on infants and toddlers found that a $1,000 increase in average EITC generosity (federal and state benefits) led to an increase of $2,400 in pre-tax earnings, reducing poverty by 5 percentage points (and reducing extreme poverty by 9 percentage points).C The authors found no significant decreases in poverty for children ages 6 to 17, demonstrating that the EITC may have a particularly important impact on households with the youngest children. Another study found that each additional $1,000 in maximum EITC benefits increased annual earnings for unmarried mothers by $2,372,MM and another recent study found that a $100 increase in maximum EITC benefits was linked to a significant $335 increase in pre-tax parental earnings.L
A rigorous simulation study examined how child poverty would change if every state were to adopt Wisconsin’s generous 43 percent state EITC ratexvi (reduced to 34% in 2011) for all families.KK The authors found that this policy would reduce child poverty by up to 1.2 percentage points overall, and by 1.5 percentage points in states with the highest child poverty rates. In addition, children in poverty would see a 4.1 percent increase in their resources-to-needs ratio. The study also simulated policy changes in the Supplemental Nutrition Assistance Program (SNAP), state child tax credits (CTC), and Temporary Assistance for Needy Families (TANF) and found that state EITCs would have the greatest poverty-reduction effect for children.
A study of DC’s EITC found a positive, significant increase of approximately 4 percent for the pre-tax earnings of single mothers when a 40 percent DC credit was combined with the federal credit.P
Another study using nationally representative data on women ages 22 to 39 found that the EITC had positive but statistically insignificant 1-year effects on the employment and earnings of mothers with children under age 6, although significant effects were found for some subgroups (such as mothers who gave birth to any children between ages 22 and 24, or mothers with children age 6 or older).S
A study of a large sample of single mothers found that a $1,000 increase in the federal and state combined credit was linked to a $700 increase in savings account balances; however, when analyzed separately, state EITCs alone did not significantly increase savings.D The study also found null effects on earnings and household debt.
Another study of single mothers found that an additional $1,000 in the combined federal and state credits was linked to a 3.9 percentage point reduction in the odds of being cost-burdened by housingxvii and a 5.2 percentage point reduction in being severely cost-burdened.E In addition, the EITC was linked to a 2 percentage point reduction in crowded housing, defined as more than one person per room. The study found insignificant (0.1 to 0.6 percentage points) reductions in the likelihood of being evicted or experiencing homelessness, but found positive, significant impacts on earnings (between a $2,400 and $2,900 boost in annual pre-tax earnings, depending on whether the authors analyzed the Current Population Survey or American Community Survey data). When the authors examined state EITCs alone, none of the housing outcomes were significant, however.E
A 2019 study using data from 2006 through 2013 examined how the lump-sum payment of the EITC, as opposed to periodic payments, affects debt and savings.PP The authors found that relative to ineligible households, EITC-eligible families see significantly lower debt levels during the months around tax filing deadlines compared to the rest of the year (64% lower). The study found that EITC-eligible families accrue debt during the months prior to tax filing time, and many use the lump-sum payment to pay down their balances rather than accumulate savings. The authors suggested that a periodic or biannual payment schedule may better serve these families in smoothing debt balances over the year. The temporary change in the child tax credit to a monthly disbursement schedule (in the American Rescue Plan Act) may offer an opportunity to evaluate the effectiveness of periodic benefits for tax credits, and the results may provide insights applicable to the EITC.
Finally, a 2021 study using data from 1998 through 2016 examined the short-term impacts of the EITC (state and federal) on childhood food insecurity.XX The authors found that each additional $1,000 in EITC benefits reduced food insecurity by 1 percent of a standard deviation on the US Department of Agriculture’s 10-point Food Security Scale for households interviewed within 3 months of EITC receipt.XX The effect was not statistically significant for the combination of the state and federal credits, whereas the effect was significant for the federal credit alone. The study did not examine the effect of state EITCs in isolation.
Healthy and Equitable Births
Through increased income, the EITC is expected to promote greater use of health care and reduced stress among low-income women, which may lead to better birth outcomes.J Although a review of the evidence found mixed impacts on increased use of prenatal care as a mechanism for healthier births, research has demonstrated that state EITCs have positive impacts on birth outcomes, although the effect sizes are generally small. One study of the combined local and state credits in New York City found that higher credits led to a small but statistically significant reduction in low birthweight rates at the community level (specifically, a 15 percentage point increase in the combined credit rates was linked to a 0.45 percentage point reduction in prevalence of low birthweight).Q
Another study with a large sample of single mothers found that state EITCs led to a 0.5 ounce (16 gram) increase in birthweight.B Research on DC’s credit expansions over time found beneficial effects ranging from 1.9 to 4.7 fewer low birthweight births per 100 live births and 48 to 104 gram increases in average birthweight (depending on the generosity of the credit; the 104 gram increase was linked to the 40% EITC).CC The DC study also found an increase in gestation length ranging from 0.12 to 0.43 weeks depending on the level of EITC generosity (between 10% to 40%). Another study of a local EITC in Montgomery County, Maryland, found that the introduction of the EITC reduced the likelihood of low birthweight by 1.9 to 2.4 percentage points among likely eligible mothers (an 18% change).V
An additional study found small but significant impacts of the EITC on birth outcomes—an increase in birthweight of 27.3 grams and an increase in gestation weeks of less than 0.1 weeks in states with generous, refundable credits (state credit generosity was defined as 10% or more of the federal credit).J States with less generous or nonrefundable credits still saw significant benefits on these measures, compared to states with no EITCs, but the benefits were smaller in magnitude. The study found no overall significant effect on prenatal care use or health behaviors during pregnancy in those states, and thus the pathway to improved birth outcomes remains unclear. A subsequent analysis by the same authors using the same data found that the improvements were larger in magnitude (37.2 grams and 0.15 gestation weeks) for Black mothers in states with generous, refundable credits compared to the effects for White and Hispanic mothers, indicating that the state credit has the potential to reduce racial disparities in birth outcomes, given that Black infants disproportionately experience low birthweight and preterm birth.II
A 2019 study using data from 1968 through 1992 found that increasing EITC exposure from birth to age 15 by $1,000 decreased adolescent births; in particular, the incidence of births before age 20 was reduced by 0.6 percentage points or 2 percent.BB This study also found beneficial effects of childhood EITC exposure on college completion by age 23. Effects were similar for White and Black women up until age 22, after which births and educational attainment for Black women did not differ based on childhood EITC exposure to the extent that these outcomes did for White women.
Finally, another study used cross-state and over-time variation in EITC payments (both federal and state) as an instrument to determine the causal impact of income on healthy births and perinatal wellbeing.YY The study found no significant causal relationship between the EITC (as an instrument for post-tax income) and outcomes such as birthweight or full-term pregnancy. Coefficients were in the positive direction, but did not meet the threshold for statistical significance. Importantly, the authors noted that they used “income and payment size in the prior year as the predictor variables for children born in January to April of a given year, and values from the current year as the predictor variables for children born in May to December” (p. 446).YY This approach ensures that the measure of EITC receipt, as the independent variable, would occur prior to the child’s birth.
Parental Health and Emotional Wellbeing
Overall, the evidence shows mixed impacts of state EITCs on caregiver mental and physical health. The only outcomes showing any negative results are smokingF,CC and obesity (a significant increase in obesity for women, but null for men),G whereas the other outcomes for this policy goal, including mental health,I,NN suicides,AA,EE,RR self-reported physical health, and longevityH,UU show positive or null impacts.
A 2020 study using data from 1993 through 2016 examined the pathways between the EITC and maternal mental health and concluded that the credit, through increased earnings, was linked to a decrease in poor mental health among mothers.I More precisely, the authors found that a $1,000 increase in the maximum state and federal credits’ combined value led to a 1.6 percentage point (or 4%) reduction in the likelihood that married mothers reported poor mental health days in the past month, and a 2.3 percentage point (or 4.7%) reduction for unmarried mothers. When findings by race were analyzed within the group of unmarried mothers, non-White mothers saw a 2.5 percentage point decrease in the likelihood of experiencing any poor mental health days in the past month, whereas White mothers saw no significant decrease. When the authors examined the impact of the generosity of state EITCs alone, they found that a 10 percentage point increase in the generosity of the credit (as a percentage of the federal credit) was linked to a 2.8 percentage point reduction in the likelihood of poor mental health days among married mothers, but no statistically significant effect was found for unmarried mothers (although the effect was in the beneficial direction).I
Another 2020 study, using data from 1993 through 2016, examined the credit’s impacts on adult physical and mental health (among workers with low educational attainment, who are most likely to be impacted by the EITC) and found that each 10 percentage point increase in the generosity of the refundable state EITC was linked to fewer reports of poor physical health (149.6 per 100,000).NN The authors found that positive impacts on mental health were greatest during the months when tax refunds were received, and the reduction in reports of mental distress during the February, March, and April months was statistically significant (a reduction of 329.7 reports per 100,000). The reduction across the full year was not statistically significant.
A 2021 analysis, using data from 1995 through 2015, sought to identify the impact of state EITCs on adult health, including outcomes such as self-reported general health, psychological distress, and tobacco and alcohol use.QQ The primary variable explored was the presence or absence of a state EITC, rather than the generosity level of the credit. The findings were null for all outcomes, but were in the positive direction for general health and reduced smoking. The average state EITC amount identified in the sample was $265 per year, and the authors suggested that this amount may have been too small to have a measurable effect on health, in contrast to the federal credit, which amounted to $1,912 on average per eligible participant in the sample. The study examined whether there were differential impacts by race (for Black, White, Hispanic, and “Other”-identified individuals) and found similarly null results.
A related study by some of the same authors sought to identify the short-term effects of state and federal EITCs (within the year of receipt) on the same set of health outcomes, and found null impacts as well.T The study compared EITC-eligible individuals interviewed in February through April to individuals interviewed from May through January of the following tax year to try to identify the short-term impacts of the credit.
Two additional studies found that a state EITC, and specifically a 10 percent or greater credit, led to a 3 to 4 percent reduction in state suicide rates.AA,EE One of the studies found a greater positive effect for non-Whitexviii and Hispanic individuals compared to White, non-Hispanic individuals (a reduction of 5.3% compared to 3.8%, respectively), but the coefficients were not significantly different.EE A third study found that each 10 percentage point increase in state EITC generosity led to a 4 percent decrease in suicide attempts and a 1 percent reduction in suicide completion.RR
Two recent causal studies, and one correlational analysis, have examined the possible effects of state EITCs on domestic violence and intimate partner abuse.OO,SS,4 The authors hypothesized that less financial stress may improve the quality of relationships, and/or that additional income may allow victims of intimate partner violence to achieve greater economic self-sufficiency and leave abusive relationships. One of the studies found that states with refundable EITCs see lower rates of intimate partner abuse.SS In particular, “isolation victimization,” in which one partner restricts another from communicating with family and friends, was 45 percent lower in states with an EITC.SS In addition, the odds of “economic coercion,” in which a partner withholds or demands money from another, were found to be 53 percent lower in EITC states.SS The second study examined intimate partner homicides only, and found no significant relationship with state EITC generosity. The authors posited that the rarity of this event may have limited the ability to detect a statistical relationship in the data.OO
A recent correlational study also found no significant relationship between state EITC generosity and intimate partner violence.4 The authors discussed the possibility that economic coercion may prevent victims from accessing the benefits in the first place, preventing the benefits from supporting their path to self-sufficiency and independence from abusive relationships. There were no racial or ethnic differences in impacts found in these studies, although the authors had hypothesized that the EITC (and other policies, including higher TANF benefits and a higher minimum wage) may have a greater protective effect for women of color because the additional resources may act as a buffer against the effects of structural discrimination.
Studies have also examined the associations between income and smokingB,F and between income and obesity,G using the EITC as an instrumental variable for income, and have found both positive and negative associations. The study on obesity concluded that income from the EITC (an additional $1,000) led to a significant increase in obesity among women of approximately 3 to 4 percentage points, depending on whether work hours were controlled for.G No significant impact was measured for men.
Two studies on smoking found contrasting results: One found that greater income, as instrumentalized by simulated credit receipt, was linked to a 5 percent lower likelihood of smoking,B whereas a second study found that higher income led to higher odds of smoking (and smoking more: A 10% increase in income led to an additional 3.4 cigarettes per day).F The authors suggested that in some cases, the increased income allowed individuals to buy more cigarettes, but in other cases, the increased income reduced stress, which in turn reduced smoking. Another study found that smoking during pregnancyxix was reduced by 1.6 percentage points with the introduction of an EITC, but only in low-generosity states (less than 10% of the federal credit) with no refund.J A study of the DC credit found an association with increased smoking during pregnancy at all four generosity levels (10%, 25%, 35%, and 40% credit), but the increase was only statistically significant for the change from a 10 percent to 25 percent credit (an increase of 2.1 mothers who smoked per 100 live births).CC A 2015 study examined the impact of EITC generosity on alcohol and tobacco consumption during pregnancy and found no statistically significant impact, but results were in the beneficial direction.YY
Finally, two studies addressed the link between state EITCs and longevity. A study on health-related quality of life and longevity found that individuals in states with their own EITCs had 2.2 additional quality-adjusted life years compared to residents of states without a credit.H A second study by some of the same authors found that each additional $100 in state EITC supplements led to a 2-week increase in adult longevity.UU
A study that primarily examined the impact of the 1993 federal EITC expansion for families with two or more children found that the additional income significantly improved parent health.7 Heads of households were up to 8.9 percentage points more likely to report being in excellent or very good health after the expansion. The author found that the most likely mechanisms were greater spending on food and a greater likelihood of having health insurance.
Nurturing and Responsive Child-Parent Relationships
Three studies offer evidence for the effects of the EITC on parenting quality and child-parent relationships, but all results failed to reach statistical significance.L,JJ,MM A 2016 longitudinal study using data from 1986 through 2000 measured the impact of an additional $1,000 in EITC exposure (federal and state) on the quality of the home environment, and the study found no significant impacts at a 2-year follow-up interview.JJ The study used the Home Observation for Measurement of the Environment (HOME) scale, which includes “objective items scored by the interviewer” such as “whether the home is cluttered” as well as “questions asked directly of the mother” such as “how often the mother reads to the child” (p. 777).JJ
A 2021 study, discussed above in the Parents’ Ability to Work section of this review, examined how EITC generosity affects the time parents spend with children and the activities they share.MM The authors used data from 2003 through 2018 and found that each $1,000 increase in the maximum EITC amount (federal and state) reduced the total time that single mothers spent with children under age 4 by approximately 4 hours per week (primarily because of increased work time), but did not significantly decrease “investment time” spent with children—activities such as reading together, providing homework help, or other activities aimed specifically at child development. This finding suggests that children’s development may not be harmed if their mothers work more in response to the EITC’s labor supply incentive, because the time they do spend with children may be more meaningful. Although mothers spent less time on home production, errands, and leisure with children, their time spent on investment activities did not significantly decline. Effects were similar for White and non-White mothers, and were only significant for unmarried mothers.
Another study found that a $100 increase in the maximum annual state and federal EITC benefits between birth and age 18 had no significant impact on the time a child spent with their mother, father, or either parent.L The coefficient was in the negative direction for time with mother, but in the positive direction for time spent with father and time spent with either parent.
Optimal Child Health and Development
Studies have considered the impacts of state EITCs on a range of child health and safety outcomes, including childhood obesity,K,L,XX asthma-related hospitalizations,Q foster care entry,M,R maltreatment reports,TT substantiated abuse or neglect cases,N and abusive head trauma,O as well as child physical and mental health.L,FF,JJ,XX
One study found a significant 11 percent decrease in foster care entry for states with a refundable EITC compared to states with no EITC, but the study did not disaggregate results by child age to allow for an examination of prenatal-to-3 outcomes.R An additional study focusing on foster care found that states with an EITC had 7.4 percent lower foster care entry rates, but this effect was driven by children ages 11 to 20, whereas no significant effect was found for children ages 0 to 5.M
A 2021 study found a significant impact of refundable state EITC generosity on reducing child maltreatment, and in this case, the results were greatest for the youngest children.TT The authors used data from 2004 through 2017 and found that each 10 percentage point increase in refundable state EITC generosity led to a 9 percent decline in neglect reports in particular (no significant association was found for physical abuse).TT The impacts were greatest for children ages 0 to 5 (324 fewer neglect reports per 100,000 children, compared to 201 fewer neglect reports for children ages 6 to 17).
Most other child health outcomes show null or mixed results for children ages 0 to 5. For example, one study found no significant impact of state EITC benefits on obesity for children ages 0 to 5,K whereas a study examining longer-term outcomes found a 1.3 percentage point decrease in the likelihood of obesity as an adult (ages 22 to 27) after early childhood exposure to the EITC (from ages 0 to 5). L This study found a greater effect on reducing obesity for Black and Hispanic children compared to White, non-Hispanic children, but the effects were not significantly different. A 2021 study using data from 1998 through 2016 found no impact of the EITC (including state and federal benefits) on the likelihood of being overweight or underweight (as measured by Body Mass Index), but the study did not disaggregate by child age.XX This study also found null results for child mental health outcomesxx in the 3 months immediately following EITC receipt. The study was focused on the short-term effects of the EITC, which is why the results were limited to the 3 months following receipt.
Two 2017 studies found no significant impacts on asthma-related hospitalizationsQ (data from 1997 through 2010) or abusive head traumaO (data from 1995 through 2013), and a 2003 study found no significant impacts on a variety of abuse/neglect indicators (data from 1990 through 1998).N The study examining pediatric abusive head trauma found that a refundable state EITC was linked to 3.1 fewer cases of abusive head trauma to infants and toddlers per 100,000 children, but the effect was not significant.O
Evidence shows the potential for long-term positive impacts of the EITC. A 2020 paper using data from 1968 through 2017 found that likely exposure to more generous EITCs (a $100 or 3% increase in federal and state credits) from ages 0 to 18 was significantly linked to a 1.7 percentage point (2.6%) increase in self-reported “very good or excellent” health in adulthood, with an effect of 1 percentage point for exposure between ages 0 and 5.L The study found that the effects were largest among families at the lower end of the income distribution (below the 40th percentile), who are most likely to receive the EITC. The study found null effects for mental health between ages 22 and 27 based on childhood exposure to the EITC, but the coefficients were in the beneficial direction.
A 2019 study, also using data from 1968 through 2017 (from the Panel Study of Income Dynamics), found that prenatal exposure to the EITC (specifically, a $1,000 increase in maximum credit exposure during pregnancy) was linked to a small (less than 0.1 point) increase in the child’s health status in adulthood on a 5-point scale of poor to excellent health, and a child’s likelihood of smoking as an adult decreased as well.FF Exposure during ages 0 to 5 did not yield a significant benefit, however. In addition, Black and male children did not see the same significant benefits that White and female children did in this study.
The longitudinal 2016 study mentioned in the Nurturing and Responsive Child-Parent Relationships section of this review also examined the effects of exposure to an additional $1,000 in EITC payments (both federal and state) on children’s behaviors. The authors found that the additional payment led to improved scores on the Behavior Problems Index (a 28-item questionnaire with a mean normalized score of 100).JJ The Behavior Problems Index is only completed by mothers of children age 4 and older, so it does not capture the behavior of infants and toddlers (under age 3) and therefore is not reflected in Table 2.
Finally, a 2015 study using data from 1986 through 2000 examined the causal impact of income (using the EITC as an instrumental variable) on whether children were ever breastfed.YY The study found null impacts on this indicator. The authors had theorized that reduced stress and anxiety as a result of the extra income may have led to increased breastfeeding, but their data did not confirm this prediction.
- An impact is considered statistically significant if p≤0.05. Results with p-values above this threshold are considered null or nonsignificant.
- We present findings from the combination of state and federal credits when a study did not offer a separate analysis of state EITCs. If a study analyzed each credit separately, we present the results for state EITCs.
- The studies, as labeled in our reference list, are studies I, L, S, BB, EE, FF, GG, HH, II, MM, QQ, SS, VV, and ZZ.
- Studies J, Q, CC, and YY.
- The study defined a “low” EITC value as less than 10 percent of the federal EITC, and a “high” EITC as 10 percent or greater. The study found null results for prenatal care in states with a low refundable EITC, high nonrefundable EITC, and high refundable EITC.
- The study reported results using the category of “non-White” rather than specific races or ethnicities.
- This review uses “single mothers” or “unmarried mothers” in the discussion of results to correspond with how the authors themselves described their samples.
- Study L used data from 1968 through 2017; study LL used data from 1971 through 2015; study MM used data from 2003 through 2018; study VV used data from 1995 through 2016.
- The author reported results for the categories of “Black” and “non-Black” in the paper.
- This rate only applied to families with three children in Wisconsin, but the simulation tested how child poverty would change if every eligible family with at least one child received this EITC rate. Wisconsin’s rate was chosen as the benchmark because it had the most generous rate from 2010 to 2012, which were the years of the data set used for the simulation.
- The US Dept. of Housing and Urban Development defines cost-burdened families as those families who pay more than 30 percent of their income for housing, and severely cost-burdened as more than 50 percent.21
- The study did not specifically refer to participants in the sample as Black, but instead used the terms “non-White” and Hispanic.
- Given the risks that smoking during pregnancy can pose to infants’ health, in addition to that of their mothers, this outcome may also be considered part of the “Healthy and Equitable Births” goal.
- Children age 3 and under were assessed using the Mental Health Indicator (adapted from the Child Behavior Checklist), and children ages 4 to 17 were assessed using the Strengths and Difficulties Questionnaire from the National Health Interview Survey.