The effects of state earned income tax credits on mental health and health behaviors: A quasi-experimental study

Abstract

The earned income tax credit (EITC) is the largest U.S. poverty alleviation program for families with children, and state EITC policies provide a modest supplement to the federal program. Yet there are few studies of the effects of state EITC policies on population health. We examined whether state EITC policies affect mental health and health behaviors. Participants were drawn from the 1995-2015 waves of the Panel Study of Income Dynamics, a diverse national cohort study (N = 10,567). We used a quasi-experimental difference-in-differences analysis to examine the effects of state EITC programs among eligible individuals, accounting for secular trends among similar individuals in non-EITC states. Outcomes included self-reported general health, psychological distress, alcohol use, and smoking. The mean size of state EITC refunds in our 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 alternative specifications, and similar in subgroup analyses by gender and marital status. This study suggests that state EITC programs, which tend to provide smaller refunds than the federal program, may not be large enough to have a positive impact on mental health and health behaviors. These findings may inform policymaking related to the generosity of state EITC programs, especially as states seek to address the socioeconomic consequences of the COVID-19 pandemic.

Keywords: Difference-in-differences; Earned income tax credit; Health behaviors; Mental health; Policy evaluation; Poverty alleviation.