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Anti-poverty tax credits provide more than financial relief for families living on tight budgets—they also appear to help prevent trauma, violence, and crime among children and youth, three studies from the University of Washington (UW) show. And these credits may cut child poverty without affecting parents’ workforce participation, other new studies show.

Researchers with the UW Center for Studies in Demography and Ecology found that the child tax credit (CTC) and earned income tax credit (EITC) are related to declines in reports of child maltreatment, youth violence, and juvenile convictions.

The CTC and EITC are among the largest anti-poverty programs in United States, notes Ali Rowhani-Rahbar, a UW epidemiology professor and study co-author. “While not originally designed to prevent violence, we find meaningful reductions in several forms of violence per each $1,000 increase in EITC provided,” he adds.

This new research comes as policymakers at both the national and state levels are considering proposals to expand these tax credits. Child poverty fell more than 40% between 2020 and 2021 thanks to a temporary one-year expansion of the CTC—part of the government’s pandemic response.¹

In 2022, the EITC lowers moderate- and low-income workers’ tax bills by between $560 and $6,935, depending on family size, income, and filing status; taxpayers receive a payment if the EITC they qualify for is higher than their tax bill.² The CTC lowers parents’ taxes by $2,000 per child in 2022; families who owe little or no taxes may still receive a partial payment of up to $1,500.

Tax Credits Linked to Immediate, Short-Term Reductions in Reports of Child Maltreatment

The UW researchers found a significant drop in state-level reports of child maltreatment in the period after tax filers received refunds including the EITC and CTC.³ Specifically, for each additional $1,000 in per-child EITC and CTC refund, state reports to child welfare authorities declined 5% in the five weeks following the payments, they report.

Child maltreatment disproportionately affects children in poverty, the researchers note. “Because refundable tax credits are delivered to families as a lump-sum payment with their tax refunds, these credits create unusual ‘financial slack’ at tax time for low-income families living on a tight budget,” they write.

“Most victims of child maltreatment experience neglect,” explains Heather Hill, a UW professor of public policy and management and study co-author. “The definition of neglect overlaps substantially with poverty and material hardships—for example, not providing children with sufficient food, clothing, or medical care. For that reason, income support may reduce child maltreatment directly by increasing income and reducing material hardships or indirectly by reducing parental stress and improving parenting.”

“Increased income could also help parents afford an improved child care arrangement and prevent mothers from re-partnering with someone who is not the child’s biological father out of economic necessity,” Rowhani-Rahbar adds.

For the study, the research team compared EITC and CTC refund data from the Internal Revenue Service to state-specific child maltreatment report data from the National Data Archive on Child Abuse and Neglect for 48 states and the District of Columbia. They examined tax seasons 2015 through 2018, a period when the timing of payments changed because of the PATH (Protecting Americans Against Tax Hikes) Act. The drop in child maltreatment reports continued to correspond to the receipt of tax refunds despite the change in timeline.

“The generosity of these anti-poverty programs matters,” Rowhani-Rahbar says. “Even relatively small increases in income may lower the risk of maltreatment by reducing economic stress and supporting parents’ capacity to engage in nurturing behaviors.”

Youth Report Fewer Physical Fights and Juvenile Convictions With Higher Family EITC Benefits

More than half of states offer working families additional EITCs—with some state payments more generous than others. The UW researchers found that high school students report significantly less physical fighting in states with higher EITCs.⁴ Specifically, a 10-percentage point greater state EITC was associated with nearly 4% fewer physical fights. The effect was particularly notable among males.

Previous research shows higher levels of household poverty make it more likely that children will experience physical aggression, fighting, and bullying, according to the researchers. Residents of disadvantaged neighborhoods are more likely to be assaulted, robbed, and carry a weapon, they note.

The researchers suggest that EITC benefits “could reduce youth violence by relieving parental stress, preventing harsh parenting and family conflict, allowing families to move to safer and more cohesive neighborhoods with more economic opportunity, and enabling families to invest in ways that protect youth from violence.” These investments could include tutoring, youth sports, or enrichment programs that “provide more supervision and fewer opportunities for delinquency,” notes Hill.

For the study, the researchers analyzed state-level EITC generosity and self-reports of physical violence among high schoolers in the previous year using Youth Risk Behavior Surveillance System data from 2005 to 2019. They accounted for changes in state EITC levels and differences in state GDP, welfare payments, and minimum wages.

This study provides “some of the first evidence that a cash transfer program can serve as a prevention strategy for youth violence,” Rowhani-Rahbar says.

A related UW study links each additional $1,000 in total EITC benefits a child’s family receives before their 14th birthday with an 11% lower risk of self-reported criminal conviction during adolescence.⁵

Those findings are based on an analysis of the 1979 National Longitudinal Study of Youth, which interviewed U.S. adolescents born between 1979 and 1998 at ages 15 to 19. The researchers estimated total family EITC benefits based on federal, state, and family-size eligibility differences and payment levels during the study period.

Income support for low- and middle-earning families may reduce a teenager’s risk of involvement with the criminal justice system, particularly among boys, the research team concludes.

“Multiple forms of violence—child maltreatment, youth violence, intimate partner violence, suicide—are interconnected and often share the same root causes, such as lack of economic opportunities and unemployment,” Rowhani-Rahbar explains. “Policies that support income conceivably could reduce the risk of all these forms of violence.”

Payments May Cut Child Poverty Without Reducing Parents’ Workforce Participation, Says New Evidence

For the largest reduction in child poverty, expand the EITC, argue researchers with Columbia University’s Population Research Center who analyzed state anti-poverty programs.⁶

They assessed the potential impact on child poverty levels if all states adopted policies that mirrored the most generous and inclusive states on the EITC and three other key state-administered programs—state CTC, Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps), and Temporary Assistance for Needy Families (TANF).

Adopting the most generous state EITC policy from 2010 would have the biggest effect on child poverty—nearly 2.7 million children’s families would no longer live below the poverty line, they found.

And a total of 5.5 million children would be pulled out of poverty “if all states adopted the most generous or inclusive state policy in all four policy areas,” they reported, noting that the true number is likely higher.

Another recent study found that the temporary 2021 CTC expansion reduced food insecurity and material hardship for the lowest-income families without affecting their workforce participation.⁷

Researchers with the University of Michigan’s Population Studies Center report that the CTC recipients they surveyed—predominantly single mothers with monthly incomes below $2,000—were much less likely to report they had trouble providing food for their families and somewhat less likely to have problems paying other bills such as for utilities. The researchers report they found no effect on recipients’ labor force participation, which they suggest should reassure policymakers concerned that the expanded CTC payment are a disincentive to work.

While the UW studies examining the impact of tax credits on violence were not designed to compare the full costs and benefits of EITC and CTC expansion, in Hill’s view, these anti-poverty policies can be cost effective, as childhood experiences have lifelong implications for health and well-being.

“Interventions in childhood have the largest potential for returns on investment,” explains Hill. “Reductions in child maltreatment and youth convictions have substantial benefits for both children, parents, and society because the systems designed to deal with those problems are so costly.”

The costs of administering the EITC and CTC are low compared to other types of programs such as a preschool or employment training, Hill argues. “When you put together relatively low administration costs with potentially huge savings on interactions with the child welfare and criminal justice systems, we can be optimistic about the benefits outweighing the costs in the long run.”

This article was produced under a grant from the Eunice Kennedy Shriver National Institute of Child Health and Human Development (NICHD). The work of researchers from the following NICHD-funded Population Dynamics Research Centers was highlighted: University of Washington, Columbia University, and University of Michigan.

References

[1] Kalee Burns, Liana Fox, and Danielle Wilson, “Child Poverty Fell to Record Low 5.2% in 2021,” U.S. Census Bureau, Sept. 13, 2022.

[2] Internal Revenue Service, “Earned Income and Earned Income Tax Credit (EITC) Tables.”

[3] Nicole L. Kovski et al., “Short-Term Effects of Tax Credits on Rates of Child Maltreatment Reports in the United States,” Pediatrics 150, no. 1 (2022): e2021054939.

[4] Kimberly Dalve et al., “Earned Income Tax Credit and Youth Violence: Findings from the Youth Risk Behavior Surveillance System,” Prevention Science 23, no. 8 (2022): 1370-1378.

[5] Caitlin A. Moe et al., “Cumulative Payments Through the Earned Income Tax Credit Program in Childhood and Criminal Conviction During Adolescence in the US,” Journal of the American Medical Association 11, no. 5 (2022): e2242864.

[6] Jessica Pac et al., “Reducing Poverty Among Children: Evidence From State Policy Simulations,“ Children and Youth Services Review 115 (2020): 105030.

[7] Natasha Pilkauskas et al., “The Effects of Income on the Economic Wellbeing of Families With Low Incomes: Evidence From the 2021 Expanded Child Tax Credit,” National Bureau of Economic Research (NBER), Working Paper 30533, October 2022.