Director of Federal Fiscal Policy
We’ve previously highlighted research showing that the Earned Income tax Credit (EITC) encourages work — particularly among single mothers — and that children whose families get more income from the credit tend to do better in school. Now, two new working papers strengthen the case that the EITC helps children from low- and moderate-income working families get to college and show that it does so by boosting their educational performance and making college more affordable for families with high-school seniors.
Improving Academic Performance
One paper, by Michigan State University’s Michelle Maxfield, examines data from before and after changes to federal and state EITCs and finds that children receiving larger EITCs tend to do better academically in both the short and long term. Specifically, receipt of larger EITCs is linked to:
Maxfield underscores that the size of these effects is substantial — comparable to what one might expect from significant initiatives to reduce class size and improve teacher quality. Moreover, the findings show that the academic benefits of larger EITCs extend to children of all ages and racial and ethnic groups, with some suggestive evidence that the benefits are slightly larger for minority children and boys.
The paper also supports existing evidence that the EITC boosts employment and after-tax incomes.
Helping Families With High-School Seniors Pay for College
The other paper, from the University of Texas’ Dayanand S. Manoli and the Treasury Department’s Nicholas Turner, finds that college enrollment rates tend to rise with family earnings up to the earnings level where a family qualifies for the maximum EITC, at which point both enrollment rates and the size of a family’s EITC level off. Their findings indicate: