The Long-Term Effects of Childhood Exposure to the Earned Income Tax Credit on Health Outcomes

Overview 

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. 

Findings 

Using data from the 1968 to 2017 waves of the Panel Study of Income Dynamics, the research team found that: 

• An additional $100, or a 3 percent 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 percent between ages 22 and 27 
  • Decreases the likelihood of being obese by 4.1 percent 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, groups that are more likely eligible for the program. 

EITC exposure in childhood can improve health outcomes later in life through several mechanisms. The research team found that EITC generates significant increases in parental income through the tax credit itself and increases in parental earnings via labor supply incentives. In addition, EITC exposure increases the likelihood of having health insurance coverage in childhood, which may lead to improved access to and use of health care services in childhood and reduced financial risk associated with high out-of-pocket health expenses. 

Implications for Policy and Practice 

Our study suggests expanding EITC programs can have long-term health impacts on children. The research provides information on spillover benefits that are not typically considered in policy discussions around the program. Our findings should be considered in discussions of social costs and benefits of the program, as heathier individuals are more likely to be in the workforce and less likely to rely on public assistance programs. More broadly, these findings suggest that programs providing income supports to families of poor or near-poor children, such as EITC, Supplemental Nutrition Assistance Program, Temporary Assistance for Needy Families, and unemployment benefits, could generate long-term health benefits and that failure to account for these effects could lead policymakers to undervalue these programs.