More research exists on the impacts of the federal EITC than the state credit, and many studies examine the combined impacts without separate analyses of the state credit. However, sufficient research examining the added value of the state credit, and particularly a refundable credit of 10 percent or more of the federal credit, exists to support the effectiveness of the state EITC as a policy to strengthen birth outcomes and 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 below displays the findings associated with the state EITC (beneficial, null,iii or detrimental) for each of the strong studies (A through JJ) in the causal studies reference list, as well as 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.
Table 2: Evidence of Effectiveness for the State EITC 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||CC||Mostly Null
|Health Insurance Coverage||I, K||
|Avoided Doctor Visit Due to Cost||I||
|Doctor or Dentist Visit||K||
|Parents’ Ability to Work||Employment||B, T, U, W, Z, GG||I, S, X, Y, DD||Mixed
|Weeks Worked||U, Z||
|Sufficient Household Resources||Child Poverty||A, W||GG||Mixed
|Earnings/Income||B, W, Z, GG, HH||D, P, S||
|Savings Account Balance||D**||
|Housing Cost Burden||E||
|Evictions and Foreclosures||E||
|Reliance on Public Assistance||Z||
|Healthy and Equitable Births||Birthweight||B, J, Q, V, CC, II||Positive
|Gestation Weeks||J, CC, II||
|Reduction in Adolescent Births||BB||
|Parental Health and Emotional Wellbeing||Maternal Mental Health||I⁺||Mixed
|Adult Suicide Rates||AA, EE||
|Quality-Adjusted Life Years||H||
|Nurturing and Responsive Child-Parent Relationships||Quality of the Home Environment||JJ||Trending Nullθ
|Optimal Child Health and Development||Foster Care Entry||R||M¥, N||Mostly Null
|Substantiated Abuse/Neglect Reports||N||
|Abusive Head Trauma||O||
|Long-Term Health||L, FF||
*Effects were most detrimental for lower-skilled, less educated single mothers, for whom the EITC expansions were offset by losses in other transfer income. Effects were null for other subgroups.
**This study found that a $1,000 increase in the federal and state combined credit was associated with a $700 increase in savings account balances; however, when analyzed separately, the effect of the state EITC alone was not significantly associated with greater savings.
⁺This study found a significant reduction of 4 percentage points in the likelihood that married mothers in states with an EITC reported a poor mental health day in the past 30 days. No significant effects were found for unmarried mothers.
¥This study found null effects (in the beneficial direction) for ages 0 to 5 and 6 to 10, but it found significant beneficial effects for ages 11 to 20.
θTrending indicates that the evidence is from fewer than two strong causal studies or multiple studies that include only one location, author, or data set.
Access to Needed Services
By increasing income, the EITC is expected to promote greater use of health care, including prenatal care.J However, three studies that examined the impact of the state EITC on the use of prenatal care found overall mixed results that were largely insignificant.J,Q,CC A 2017 study that examined both the generosity and refundability of state credits found mostly null impacts on first trimester prenatal care, with a significant increase of 4.8 percentage points only in states with a low, nonrefundable EITC compared to the period within the state prior to the implementation of the EITC.J A 2019 study of the DC credit found results that trended in the negative direction, with a reduction of 6.9 mothers receiving first trimester prenatal care for every 100 live births when the credit increased from 10 percent to 25 percent.CC The authors posited that women may have less time to seek prenatal care if they work more as a result of the EITC.CC However, there was no significant effect of the initial implementation of the credit or the increase from 25 to 35 percent of the federal EITC. A third study found no significant link between New York’s EITC and prenatal care use.Q
A fourth study, in 2019, 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. A 2016 study found no effect of a $100 increase in the value of the state EITC 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
Parents’ Ability to Work
Research on the federal EITC, informing later studies of state credits, 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 (in 1996) to establish the EITC’s effect on women’s labor force participation found that between 1984 to 1986 and 1988 to 1990 (before and after the 1986 Tax Reform Act expanded the EITC), the federal 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 women with two or more children, with the largest effects for the women who had a high school degree or less.11 A 2006 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 those with one child.12
Less research on the state EITC’s influence on labor force participation exists; most studies that include the state EITC examine the effects of the combination of federal and state credits. However, most of 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,T,U A 1999 study of over 100,000 single mothers found that 63 percent of the increase in weekly employment between 1984 and 1996 could be attributed to a combination of the federal and state EITCs, as well as 37 percent of the weekly employment increase from 1992 to 1996.T A 2018 study that examined the effects of the federal and state credits found that among single women with a high school degree or less, a $100 increase in the maximum 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 2012 simulation study examining the state credit in New York also projected a positive employment effect; in particular, the authors 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 mothers entering the workforce.W A 2011 study found that a 10 percent state EITC increased employment among single mothers by 2.1 percentage points compared to single women with no children,GG and a 2010 study 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
A 2019 study 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 whether they defined the maximum EITC “as federal, state, or federal plus state” (p. 12).Z
The research is not consistent, however. A 2006 study that compared women in Wisconsin (with a state supplement) to women in states without a state EITC found null effects on employment,X and a 2019 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 Another 2019 study using a natural experiment method across state borders found null effects on employment and wages, but the authors cautioned that their study did not examine poverty, which in their view is the key goal of the state EITC program.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 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.I Finally, another 2019 study found overall insignificant effects of the EITC (federal and state) on women’s employment, but the effects were significant in the positive direction for some subgroups (such as single women who had children between ages 22 and 24).S The authors found a 24.9 percentage point increase in employment at age 40 for that subgroup for each 10 percentage point increase in the EITC phase-in rate for families with two children.
Sufficient Household Resources
The federal EITC has been shown to reduce poverty rates among low-income families.4 For example, a 2018 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 the state EITC contributes to poverty reduction as well, although the impact of the state EITC 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 Similarly, a simulation study of the New York State EITC estimated that a 45 percent refund rate (increased from the current level of 30 percent) could lead to between 68,000 and 98,000 individuals moving out of poverty, given positive effects on earned income.W A study with a large, representative sample found that the state credit was associated with 32 percent higher annual earnings,B although another study found that higher earnings through EITC expansions may lead to a reduction in other safety net benefits, leaving families with fewer resources overall.C As the authors explained: “A 1 percentage point increase in the EITC subsidy rate lowers after-tax income among mothers with less than a high school education by about 0.5 percent, suggesting that transitions into work induced by the expanded generosity of the EITC results in lower total income among the less skilled” (p. 82).C
A 2011 study found that a 10 percent state EITC was associated with a 2.2 percent increase in earnings but had no statistically significant effect on overall poverty.GG However, the study did find a beneficial effect of the EITC on reducing the share of families whose earnings were below 50 percent of the federal poverty level.
A 2018 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 4.2 percent greater likelihood of completing college, a 1 percent greater likelihood of being employed, and 2.2 percent 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, however; a $1,000 increase in the credit amount led to a $2,000 increase in annual pre-tax family earnings during ages 0 to 5 in this study.HH
One study of DC’s EITC expansion found a positive impact on earnings, but the effect became statistically insignificant after controlling for citywide wage increases.P Finally, a study using nationally representative data on women ages 22 to 39 found that the EITC had positive but statistically insignificant effects on the long-run employment and earnings of mothers with children under age 6,iv although significant effects were found for some subgroups (such as mothers who had children between ages 22 and 24, or mothers with older children).S
A study of a large sample of single mothers found that a $1,000 increase in the federal and state combined credit was associated with a $700 increase in savings account balances; however, when analyzed separately, the state EITC alone was not significantly associated with greater savings.D The study also found null effects on earnings and household debt. Another study of single mothers found that the combined federal and state credits were associated with a 3.9 percentage point reduction in the odds of being cost-burdened by housingv and a 5.2 percentage point reduction in being severely cost-burdened.E The study found insignificant (0.1-0.6 percentage points) reductions in the likelihood of being evicted or experiencing homelessness.
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 the use of prenatal care, research has demonstrated that the state EITC has 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 were associated with 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 low birthweight).Q Another study with a large sample of single mothers found that the state EITC was associated with a 0.5 ounce (16 grams) increase in birthweight.B Research on the District of Columbia’s credit changes 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 percent EITC).CC Another study of a local credit 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 percent change).V
An additional study found small but significant impacts of the EITC on birth outcomes – an increase of 27.3 grams and an increase in gestation weeks of less than 0.1 weeks in states with generous, refundable credits (generosity was defined as 10 percent or more of the federal credit).J However, the study found no overall significant effect on prenatal care utilization 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 0.2 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.II
Finally, a 2019 study 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
Parental Health and Emotional Wellbeing
Overall, the evidence shows mixed impacts of the state EITC on caregiver mental and physical health. However, the only outcomes showing any negative results were smokingF,CC and obesity,G whereas other key outcomes, including mental health,I suicides,AA,EE and longevity,H all showed positive impacts.
A recent working paper examined the pathways between the state EITC and maternal mental health and concluded that the credit, through increased earnings, was associated with a 4 percentage point decrease in poor mental health among married mothers, but no significant effect was found for single mothers.I The authors posited that because federal and state EITC expansions may benefit unmarried mothers who are already working (which has been found in other studies as wellU), the credit may have no impact on bad mental health days for this group, whereas for married mothers whose spouses work, the credit expansions may reduce their employment and increase family income, improving overall mental health.I Two additional studies found that the state EITC, and specifically a 10 percent or greater credit, was associated with a 3.9 to 5.5 percent reduction in state suicide rates, although these study samples were not limited to parents/caregivers only.AA,EE
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 was associated with a 1.1 pound increase in bodyweight and higher rates (5.4 to 6.9 percentage points) of obesity among those who were already overweight, but this effect was significant for women only.G Two studies on smoking found contrasting results: one found that greater income, as instrumentalized by simulated credit receipt, was associated with 5 percent lower odds of smoking,B whereas a second study found that higher income led to higher odds of smoking (and smoking more: a 10 percent 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 of the variable impact of the state EITC by credit generosity found that smoking during pregnancy was reduced by 1.6 percentage points with the introduction of an EITC, but only for those in low-generosity states (less than 10 percent of the federal credit) with no refund.J Finally, a study of the DC credit found an association with increased smoking during pregnancy at all four generosity levels (10, 25, 35, and 40 percent 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
Finally, a study on health-related quality of life and longevity found that individuals in states with their own EITC had 2.2 additional quality-adjusted life years compared to residents of states without a credit.H Further research is needed to resolve the contradictory findings of the impact of the state EITC on caregiver health.
Nurturing and Responsive Child-Parent Relationships
A 2016 longitudinal study 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 impact at a 2-year follow-up interview.JJ The study used the Home Observation for Measurement of the Environment (HOME inventory), 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
Optimal Child Health and Development
Several studies have considered the impact of the state EITC on a range of child health and safety outcomes, including child obesity,K,L asthma-related hospitalizations,Q foster care entries for abuse and neglect,M substantiated abuse or neglect cases,N and abusive head trauma.O The studies found no statistically significant associations with health and safety outcomes in the prenatal-to-3 time period but some evidence of a positive impact on older children (ages 6 to 14). One study found a significant 11 percent decrease in foster care entries for states with a refundable EITC compared to states with no EITC, but the study did not disaggregate results by child age to allow an examination of prenatal-to-3 outcomes.R
Evidence does show potential for long-term positive impacts of the EITC. A recent longitudinal working paper found that likely exposure to more generous earned income tax credits (a $100 increase in federal and state credits) from ages 0 to 18 was significantly associated with a 2.7 percentage point (4.1 percent) increase in self-reported “very good or excellent” health in adulthood, with an effect of 1.7 percentage points for exposure between ages 0 and 5.L The study found that the effects were larger among families at the lower end of the income distribution (below the 40th percentile), who are most likely to receive the EITC. Another 2019 study found that prenatal exposure to the EITC (specifically, a $1,000 increase in maximum credit exposure during pregnancy) was associated with 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.FF
The longitudinal 2016 study mentioned in the nurturing parenting section above 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 of 0.57 points on the child Behavior Problems Index (a 28-item questionnaire with a mean normalized score of 100).JJ However, the Behavior Problems Index is only completed by mothers of children ages 4 and older, so it does not capture the behavior of infants and toddlers (under age 3).
- An impact is considered statistically significant if p<0.05.
- See Tables 5A, 5B, and 6 in the original study.
- The US Dept. of Housing and Urban Development defines cost-burdened families as those who pay more than 30 percent of their income for housing, and severely cost-burdened as more than 50 percent.21