As the nation’s foremost poverty reduction program, the Earned Income Tax Credit (EITC) provides refundable tax credits to low-income working families. While EITC expansions are typically associated with improvements in maternal mental health, little is known about the mechanisms through which the program affects this outcome. Anuj Gangopadhyaya, Fredric Blavin, Breno Brago, and Jason Gates of the Urban Institute assess the impact of more than two decades of federal expansions in EITC credits and the implementation of state-specific EITC programs on maternal mental health in this working paper published in Health Economics.
Using data from the Behavioral Risk Factors Surveillance System, the research team sampled all nonelderly mothers with no more than a high school degree who reported having a child less than 18 years old in her household. They find that:
- A $1,000 increase in the maximum available EITC credit is associated with a 4.0 percent reduction in the likelihood of reporting any poor mental health days in the past month for married mothers and a 4.7 percent reduction for unmarried mothers.
- There is little evidence that changes in the EITC benefit structure affect uninsured status of mothers.
- Federal EITC expansions are associated with increased employment for unmarried mothers and small reductions in employment for married mothers.
- State EITC expansions have no association with maternal employment but are associated with improved mental health for married mothers.
The likely primary mechanism through which the EITC impacts maternal mental health is through the direct refundable tax credit received for married mothers and potentially a combination of the credit and its employment effects for unmarried mothers. For state-specific programs, the direct income credit is likely the only channel through which state EITC programs affect mental health for married mothers.
Implications for Policy and Practice
Mental illness impacts all facets of a person’s life, and can have broader consequences for families, labor markets, and public programs. Mental illness in adulthood is associated with lower earnings and lower educational attainment, and maternal mental illness specifically may be a source of intergenerational transmission of poverty.
Since its establishment in 1975, the EITC program has grown to be one of the most important means-tested transfer programs in the country. These latest findings help disentangle the complex linkages between the program and possible mental health effects, and point to a real benefit of increases in income on health and well-being—an evidence base that continues to grow.
The Earned Income Tax Credit (EITC) is one of the largest safety net programs in the United States. In 2019, the EITC reached 25 million tax filers at a total cost of $63 billion. Using variation in the federal and state EITC, Breno Braga, Fredric Blavin and Anuj Gangopadhyaya evaluated the long-term impact of EITC exposure during childhood on the health of young adults.