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New Study Shows EITC Improves Children’s Math and Reading Scores | Tax Credits for Working Families

Tax Credits for Working Families

New Study Shows EITC Improves Children’s Math and Reading Scores

June 27th, 2011

Over the past two weeks we’ve shared a lot of research about the benefits of the Earned Income Tax Credit (EITC) for working families, from lowering maternal smoking rates, to improving the health of babies, to raising maternal income and employment. Today, here’s a look at a study published earlier this month that reveals that the EITC may also raise children’s math scores and reading comprehension.

The study, “The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit,” used historical changes in the federal EITC to estimate the effects of income. Over the last 20 years, expansions in the federal EITC were sizable and primarily affected low- to middle-income families; by looking at math and reading scores of children in these families over time, researchers could model the effect of income on test scores, using a method that holds constant many of the other factors that affect children’s educational outcomes.

Their findings indicate that when the federal EITC increased family income by just $1,000 a year for two years, children’s combined math and reading test scores also increased by an average of 6 percent of a standard deviation, which is statistically significant. These achievement gains are even larger for children from more disadvantaged backgrounds, for younger children, and for boys. Since higher math and reading test scores have been shown to lead to long-term academic success and improved graduation rates, this study suggests that children of federal EITC recipients may receive lasting benefits from the credit that ultimately improve their life chances as an adult.

The study looked at data on almost 4,500 children in the Children of the National Longitudinal Survey of Youth (NLSY), who are given a battery of Peabody Individual Achievement Tests every other year. The main sample included children between the ages of 5 and 14, observed in at least two consecutive (even-numbered) survey years between 1988 and 2000, and controlled for family income and family background characteristics such as mother’s education. They excluded families with a change in maternal marital status. Their model compares improvements in child achievement for children from low- and middle-income families (that were likely to benefit from the EITC) with improvements from higher-income families (who were ineligible for the EITC.)

The researchers identify a variety of possible mechanisms by which the EITC might improve math and reading scores, including reduced parental stress, depression and ill-health, and the possibility that parents spent the additional income on books, better child care, better health care for their children, or moving to a better neighborhood.

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