The Anti-Poverty, Targeting, and Labor Supply Effects of the Proposed Child Tax Credit Expansion
Kevin Corinth et al.
NBER Working Paper, October 2021
The proposed change under the American Families Plan (AFP) to the Tax Cuts and Jobs Act (TCJA) Child Tax Credit (CTC) would increase maximum benefit amounts to $3,000 or $3,600 per child (up from $2,000 per child) and make the full credit available to all low and middle-income families regardless of earnings or income. We estimate the anti-poverty, targeting, and labor supply effects of the expansion by linking survey data with administrative tax and government program data which form part of the Comprehensive Income Dataset (CID). Initially ignoring any behavioral responses, we estimate that the expansion of the CTC would reduce child poverty by 34% and deep child poverty by 39%. The expansion of the CTC would have a larger anti-poverty effect on children than any existing government program, though at a higher cost per child raised above the poverty line than any other means-tested program. Relatedly, the CTC expansion would allocate a smaller share of its total dollars to families at the bottom of the income distribution -- as well as families with the lowest levels of long-term income, education, or health -- than any existing means-tested program with the exception of housing assistance. We then simulate anti-poverty effects accounting for labor supply responses. By replacing the TCJA CTC (which contained substantial work incentives akin to the Earned Income Tax Credit) with a universal basic income-type benefit, the CTC expansion reduces the return to working at all by at least $2,000 per child for most workers with children. Relying on elasticity estimates consistent with mainstream simulation models and the academic literature, we estimate that this change in policy would lead 1.5 million workers (constituting 2.6% of all working parents) to exit the labor force. The decline in employment and the consequent earnings loss would mean that child poverty would only fall by 22% and deep child poverty would not fall at all with the CTC expansion.
The Initial Effects of the Expanded Child Tax Credit on Material Hardship
Zachary Parolin et al.
NBER Working Paper, September 2021
The transformation of the Child Tax Credit (CTC) into a more generous, inclusive monthly payment marks a historic (temporary) shift in U.S. treatment of low-income families. To investigate the initial impact of these payments, we apply a series of difference-in-difference estimates using Census Household Pulse Survey microdata collected from April 14 through August 16, 2021. Our findings offer three primary conclusions regarding the initial effects of the monthly CTC. First, payments strongly reduced food insufficiency: the initial payments led to a 7.5 percentage point (25 percent) decline in food insufficiency among low-income households with children. Second, the effects on food insufficiency are concentrated among families with 2019 pre-tax incomes below $35,000, and the CTC strongly reduces food insufficiency among low-income Black, Latino, and White families alike. Third, increasing the CTC coverage rate would be required in order for material hardship to be reduced further. Self-reports suggest the lowest-income households were less likely than higher-income families to receive the first CTC payments. As more children receive the benefit in future months, material hardship may decline further. Even with imperfect coverage, however, our findings suggest that the first CTC payments were largely effective at reducing food insufficiency among low-income families with children.
The Effect of Safety Net Generosity on Maternal Mental Health and Risky Health Behaviors
Lucie Schmidt, Lara Shore-Sheppard & Tara Watson
NBER Working Paper, September 2021
A generous safety net may improve mental health outcomes and stress-related health behaviors for single mothers by promoting financial security, but stigma and hassle associated with welfare use could offset some of these gains. We use a simulated safety net eligibility approach that accounts for interactions across safety net programs and relies on changing policies across states and time to identify causal effects of safety net generosity on psychological distress and risky behaviors of single mothers. Our results suggest that a more generous safety net is protective of maternal mental health: we estimate that a $1000 increase to the combined cash and food benefit package reduces severe psychological distress by 5.5 percent. Breaking out effects by individual programs while still controlling for potential benefits from other programs, we find that this reduction is entirely due to simulated tax credit eligibility and appears to occur in the first half of the year, when such benefits are typically received. We find no significant effect of the overall safety net on risky behaviors like smoking and heavy drinking, but this masks offsetting effects of cash and food benefits, suggesting that the impact of improved financial resources depends on details of transfer program design.
Estimating the Net Fiscal Cost of a Child Tax Credit Expansion
Jacob Goldin, Elaine Maag & Katherine Michelmore
NBER Working Paper, October 2021
Recent proposals to expand the Child Tax Credit (CTC) are at the center of current policy discussions in the United States. We study the fiscal cost of three such proposals that would expand refundability of the credit to low-income children, increase the maximum credit amount, and/or eliminate the income phase-out to make the credit universal. For each proposal, we use the Current Population Survey to estimate three components of the net fiscal cost: the direct cost (additional tax refunds or lower tax liability), revenue changes due to taxpayers' labor supply responses, and long-term changes in tax revenue due to changes in children's future earnings. We find that direct costs are by far the most important component but that long-term earning changes also play an important role, offsetting one-third or more of the direct costs, depending on the proposal and modeling assumptions. In contrast, labor supply responses only modestly contribute to the fiscal cost of CTC expansions.
The effect of awarding disability benefits on opioid consumption
Andrei Barbos & Minglu Sun
Health Economics, November 2021, Pages 2794-2807
Strong empirical evidence points towards a significantly higher prevalence of opioid consumption among people receiving disability benefits (DB) than in the general population of the United States. However, no previous research established a causal relationship between the decision to award DB to applicants and their subsequent opioid use. We aim to contribute towards filling this gap. There are channels through which awarding DB may both increase and depress opioid consumption, and thus, ex ante, the sign of a potential causal relationship is ambiguous. To correct for the treatment endogeneity, since an individual's age at the time of the decision on an application impacts discontinuously at certain age cutoffs the award decision, we employ a fuzzy Regression Discontinuity model with three age cutoffs used for identification. We find that awarding DB increases the likelihood of using opioids by about 27-30 percentage points. This suggests that the positive association between DB receipt and opioid consumption is likely to be causal.
Duration-Weighted Exposure to Neighborhood Disadvantage and Racial-Ethnic Differences in Adolescent Sexual Behavior
Daniel Carlson, Paul Bellair & Thomas McNulty
Journal of Health and Social Behavior, forthcoming
Racial-ethnic disparities in adolescent sexual risk behavior are associated with health disparities during adulthood and are therefore important to understand. Some scholars argue that neighborhood disadvantage induces disparities, yet prior research is mixed. We extend neighborhood-effects research by addressing long-term exposure to neighborhood disadvantage and estimation bias resulting from inclusion of time-varying covariates. Drawing from the Fragile Families and Child Well-Being Study, we compare a point-in-time proximal measure of neighborhood disadvantage with a duration-weighted measure using marginal structural models with inverse probability of treatment weights. Findings indicate that multiracial, non-Hispanic black, and Hispanic youth exhibit significantly higher sexual risk and duration-weighted exposure to neighborhood disadvantage than non-Hispanic white adolescents. Duration-weighted exposure is a better predictor of sexual initiation and number of partners by age 15 than a point-in-time proximal measure of neighborhood disadvantage and accounts for a substantial portion of the race-ethnic differences in sexual risk.
Do grocery food taxes incentivize participation in SNAP?
Jianqiang Zhao, Harry Kaiser & Yuqing Zheng
Regional Science and Urban Economics, forthcoming
The Supplemental Nutrition Assistance Program (SNAP) is the largest federal food assistance program in the United States and is designed to reduce food insecurity especially for low income working families, disabled people, and senior citizens. Although economists have extensively studied the factors influencing SNAP participation by eligible households as well as SNAP efficacy in reducing food insecurity, there has been no research on the potential link between the grocery food sales tax and SNAP participation rates, which is a less visible benefit of SNAP participation because participants are not taxed on their food purchases. The purpose of this research is to examine the impact of grocery food tax differences between state border counties on differences in SNAP participation. We collect food sales tax data from 2010 to 2017 including all 1184 counties on state borders in the United States, and almost one-half of those border counties (42.6% for 2017) had a sales tax on grocery food. Our results suggest that a 1% increase in the grocery tax difference between cross-border neighbors is associated with a 0.12% increase in the difference in county-level SNAP participation. That is, counties with higher grocery taxes than their neighboring counties have higher SNAP participation rates, which is likely due to the tax shielding feature of SNAP. This result has implications for states/counties that rely on the grocery tax for funding government programs.
The Role of Demographic Data Bias in the Under-Provision of Retail: A Quasi-Experimental Case Study of Low Food Access Neighborhoods in Twenty-Five Southern Metros
William Graves & Yi Zhang
Urban Affairs Review, forthcoming
Municipal policy attempting to remediate low food access neighborhoods tends to focus on improving demand conditions in these neighborhoods. We investigate the role of two fundamental measures of food demand (population and income) and the biases inherent in these data in creating low food access neighborhoods. Population and income data were collected for a 1-mile radius surrounding seventy-one grocery desert sites in Southern U.S. metro areas, those results were compared to thirty-eight low-income, non-desert sites in the same metros. No significant difference between the demand characteristics of desert and non-desert sites was found in our sample - suggesting that policy may need to be refocused on issues other than demand metrics. In addition, we detected significant demand underestimation bias from one source commonly used by grocery stores. Given these findings we believe that parcel level characteristics such as visibility, accessibility, and buildability may play a larger role in remediating low food access than addressing demand conditions.
The Extra Costs Associated With Living With a Disability in the United States
Zachary Morris et al.
Journal of Disability Policy Studies, forthcoming
People with disabilities encounter many financial expenses that those without disabilities do not incur. In this article, we provide estimates of the extra costs associated with living with a disability in the United States. Drawing on four nationally representative surveys, we estimate that a household containing an adult with a work disability requires, on average, 29% more income (or an additional $18,322 a year for a household at the median income level) to obtain the same standard of living as a comparable household without a member with a disability. Single adults with disabilities are estimated to have higher costs than those with disabilities who are married, and adults with cognitive impairments are estimated to have higher costs compared to those with other kinds of impairments. We further calculate the federal poverty rate for households that include adults with disabilities adjusted for the direct additional costs of disability. The rate rises from 24% to 35% after adjusting for the extra costs of disability, which would result in an estimated 2.2 million more people with disabilities counted as poor. This suggests that the official poverty measure in the United States substantially underestimates the degree of deprivation experienced by people with disabilities.