The Effects of State Earned Income Tax Credits on Mental Health and Health Behaviors: A Quasi-experimental Study

Principal Investigator
University of California, San Francisco

Overview

The earned income tax credit (EITC) is the largest US poverty alleviation program for families with children, with well-documented positive effects on recipient health. In addition to the federal EITC, over half of US states have implemented supplemental EITC programs. These are generally smaller than the federal refund, and some studies suggest that they too improve certain health outcomes, like low birthweight. This study expands on previous work by examining mental health and health behaviors among EITC recipients. Authors Daniel F. Collin, Laura S. Shields-Zeeman, Akansha Batra, Justin S. White, Michelle Tong, and Rita Hamad used a large longitudinal cohort and a quasi-experimental design to provide some of the first estimates of the impact of state EITC programs on mental health and health behaviors in this study published in Social Science and Medicine.

Findings

Drawing on a data sample of more than 10,500 from the 1995-2015 waves of the Panel Study of Income Dynamics, the research team  examine the effects of state EITC programs on individuals’ self-reported general health, psychological distress, alcohol use, and smoking. They accounted for underlying trends in these outcomes among a control group of similar individuals in states without supplemental EITC programs.

They found:

  • The average size of state EITC refunds in the sample was $265 for eligible individuals.
  • In the overall sample, state EITC programs were not associated with any health outcomes of interest.
  • This finding was robust to different model specifications and similar in subgroup analyses by gender and marital status.

Implications for Policy and Practice

While an increasing number of states have implemented state-level EITC programs, this study suggests that state EITC programs, which tend to provide smaller refunds than the federal program, may not be generous enough to have a positive impact on mental health and health behaviors. This evidence is important to keep in mind as policymakers decide on the generosity and scope of interventions to alleviate financial stress, especially in the wake of the COVID-19 pandemic and its economic impacts.

Published
in
Social Science and Medicine