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Benefits of the Earned Income Tax Credit Extend to the Next Generation

Roughly 27 million working families with low or moderate incomes received the Earned Income Tax Credit (EITC) this tax season to help offset their federal income and payroll taxes.  The EITC encourages work, research has long shown; the EITC expansions of the 1990s did as much to expand work among single mothers as did welfare reform of 1996.  And, exciting new research shows that the EITC’s benefits extend beyond working parents to their children — both when they are young and as adults, as our revised paper explains.

  • Healthier infants. Researchers compared changes in birth outcomes for mothers who likely received the largest increases in their EITCs under the 1990s expansions and mothers who likely received the smallest increases.  They found that infants born to mothers who likely received the largest increases had the greatest improvements in a number of areas, such as low-weight births and premature births.
  • Better school performance. Researchers who studied nearly two decades of data on mothers and their children concluded that additional income from the EITC leads to significant increases in students’ test scores. Similarly, a credit that’s worth about $3,000 a year during a child’s early years may boost his or her achievement by the equivalent of about two extra months of schooling.
  • Higher earnings as adults. Children whose families receive income from refundable tax credits (such as the EITC) are likelier to attend college; they also likely work more and earn more as adults (see graphic). Those same children are also likelier to avoid the early onset of disabilities and other illnesses associated with child poverty, which further enhances their ability to earn more as adults.
Chuck Marr
Vice President for Federal Tax Policy