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We address the role of \"psychological frictions\" in the incomplete take-up of EITC benefits with an IRS field experiment. We specifically assess the influence of program confusion, informational complexity, and stigma by evaluating response to experimental mailings distributed to 35,050 tax filers who failed to claim $26 million despite an initial notice. While the mere receipt of the mailing, simplification, and the heightened salience of benefits led to substantial additional claiming, attempts to reduce perceived costs of stigma, application, and audits did not. The study, and accompanying surveys, suggests that low program awareness/understanding and informational complexity contribute to the puzzle of low take-up.

We estimate the impacts of the Earned Income Tax Credit on labor supply using local variation in knowledge about the EITC schedule. We proxy for EITC knowledge in a Zip code with the fraction of individuals who manipulate reported self-employment income to maximize their EITC refund. This measure varies significantly across areas. We exploit changes in EITC eligibility at the birth of a child to estimate labor supply effects. Individuals in high-knowledge areas change wage earnings sharply to obtain larger EITC refunds relative to those in low-knowledge areas. These responses come primarily from intensive-margin earnings increases in the phase-in region.

Money has meaning that shapes its uses and social significance, including the monies low-income families draw on for survival: wages, welfare, and the Earned Income Tax Credit (EITC). This study, based on in-depth interviews with 115 low-wage EITC recipients, reveals the EITC is an unusual type of government transfer. Recipients of the EITC say they value the debt relief this government benefit brings. However, they also perceive it as a just reward for work, which legitimizes a temporary increase in consumption. Furthermore, unlike other means-tested government transfers, the credit is seen as a springboard for upward mobility. Thus, by conferring dignity and spurring dreams, the EITC enhances feelings of citizenship and social inclusion.

Using 4 decades of variation in the federal and state Earned Income Tax Credit (EITC), we estimate the impact of exposure to EITC expansions in childhood on education and employment outcomes in adulthood. Reduced-form results suggest that an additional $1,000 in EITC exposure when a child is 13–18 years old increases the likelihood of completing high school (1.3%), completing college (4.2%), and being employed as a young adult (1.0%) and earnings by 2.2%. Our analysis reveals that the primary channel through which the EITC improves these outcomes is increases in pretax family earnings.

This paper uses quasi-experimental variation from federal tax reform to evaluate the effect of the EITC on infant health outcomes. We find that the EITC reduces the incidence of low birth weight and increases mean birth weight: a $1,000 treatment-on-the-treated leads to a 2 to 3 percent decline in low birth weight. Our results suggest that the candidate mechanisms include more prenatal care and less negative health behaviors (smoking). Additionally, we find a shift from public to private insurance coverage, and for some a reduction in insurance overall, indicating a potential change in the quality and perhaps quantity of coverage.

This paper uses tax return data to analyze bunching at the kink points of the US income tax schedule. We estimate the compensated elasticity of reported income with respect to (one minus) the marginal tax rate using bunching evidence. We find clear evidence of bunching around the first kink point of the Earned Income Tax Credit but concentrated solely among the self-employed. A simple tax evasion model can account for those results. We find evidence of bunching at the threshold of the first income tax bracket where tax liability starts but no evidence of bunching at any other kink point.

Background To examine the effects of refundable state earned income tax credits (EITC) on infant health. Methods We use the restricted-access U.S. birth certificate data with county codes from 1989 to 2018. Birth outcomes include birth weight, low birth weight, gestational weeks, preterm birth, and the fetal growth rate. The analytical sample includes single mothers with high school education or less. Two specifications of two-way fixed effects models are employed. The first specification accounts for shared time trends across all states/counties. The second specification estimates effects based on EITC changes within contiguous counties across state borders which accounts for contemporaneous events specific to each contiguous county pair. Models are estimated pooling and stratifying by parity subgroups. Results Under the first specification, refundable state EITC is associated with improved birth outcomes. Pooling all parity, a 10%-point increase in refundable EITC is associated with an 8-gram increase in birth weight (95% CI: 2.9,14.6). The effect increases by parity. In contrast, the estimates from the second model are much smaller and statistically non-significant, both pooling and stratifying by parity. Conclusions Comparing contiguous counties across state borders, there is no evidence that refundable state EITC affects birth outcomes. However, the estimates still do not rule out moderate to large benefits for third or higher born infants.

Dahl and Lochner (2012) provides some of the first causal evidence of the effects of family income on child achievement using changes in the Earned Income Tax Credit. Unfortunately, a coding error in the creation of total family income affects the first stage estimates and inflates the instrumental variable (IV) estimates. Importantly, it does not affect the reduced-form estimates or alter statistical significance of the IV estimates. This response shows that correcting this error does not alter the core findings or main message of the paper.

Since modern welfare reform began in the 1980s, we have seen low-income parents leave the welfare rolls and join the workforce in large numbers. At the same time, the Earned Income Tax Credit has offered a monetary incentive for low-income parents to work. Thus, unlike some of the other two-generation mechanisms discussed in this issue of Future of Children, policies that encourage low-income parents to work are both widespread and well-entrenched in the United States. But parents' (and especially mothers') work, writes Carolyn Heinrich, is not unambiguously beneficial for their children. On the one hand, working parents can be positive role models for their children, and, of course, the income they earn can improve their children's lives in many ways. On the other hand, work can impair the developing bond between parents and young children, especially when the parents work long hours or evening and night shifts. The stress that parents bring home from their jobs can detract from their parenting skills, undermine the atmosphere in the home, and thereby introduce stress into children's lives. Unfortunately, it is low-income parents who are most likely to work in stressful, low-quality jobs that feature low pay, little autonomy, inflexible hours, and few or no benefits. And low-income children whose parents are working are more likely to be placed in inadequate child care or to go unsupervised. Two-generation approaches, Heinrich writes, could maximize the benefits and minimize the detriments of parents' work by expanding workplace flexibility, and especially by mandating enough paid leave so that mothers can breastfeed and form close bonds with their infants; by helping parents place their children in high-quality child care; and by helping low-income parents train for, find, and keep a well-paying job with benefits.

This paper uses data from the Household Pulse Survey to examine whether and for how long the eligibility to receive state Earned Income Tax Credit (EITC) benefits reduced self-reported household food insufficiency among lower-income households with dependent children during the COVID-19 pandemic. The results of models estimated using difference-in-differences (DD) and difference-in-difference-in-differences (DDD) methods suggest that state EITC eligibility, on average, reduced food insufficiency by about 3 percentage points between March 2021 and early October 2021. However, the results of models estimated using an event study method show that the effect was not visible in all the post-March bimonthly periods. Overall, this paper finds some evidence to suggest that state EITC eligibility reduced food insufficiency over a short period.