State Earned Income Tax Credits and Nonresident Fathers' Material Contributions to Their Children

Background & Purpose. Presently, a quarter of all children under 21 have a parent living outside their home. More than a third of these children are living in poverty (Grall, 2018). Material support from the nonresident parent – typically a father – is crucial for child development, maternal well-being, and the household economy. However, a growing body of empirical evidence suggests that nonresident fathers are limited in their ability to provide material support. The Earned Income Tax Credit (EITC) promotes work among and provides greater financial stability for low-income families. Although the EITC is primarily targeted to households with children, nonresident fathers may also benefit from the EITC, as a childless individual or to a greater extent, if they are resident with another child. Recent evidence suggests that a quarter of fathers have a child with another woman, with whom they may be residing (Carlson & Furstenberg, 2006). The EITC is a federal program; however, currently 29 states have their own EITC with varying degrees of generosity. In this study, I examine the association of state EITC policies with fathers’ contributions to their nonresident children’s households.

Methods. Analyses are based on data from the Fragile Families and Child Wellbeing Study (FFCWS), a birth cohort study, representative of urban millennial births in the US. The current study uses data from the fathers’ and mothers’ surveys conducted at baseline (around the time of the focal child’s birth) and when the focal child was approximately 1, 3, 5, and 9 years old. FFCWS oversampled nonmarital births (at a ratio of 3:1) providing a large sample of nonresident fathers. The sample is limited to a low-income population, likely to be affected by the state EITC, and includes approximately 2,600 father-year observations of 1,300 unique fathers.

I examine several mother-reported measures of nonresident fathers’ material contributions to his child, including formal child support, informal cash support, and in-kind support. I exploit the variation between states and over time in the presence, generosity, and refundability of state EITC policies to estimate the effect of state EITC on material contributions. Ordinary Least Squares (OLS) regression models estimate the associations of state EITC with nonresident fathers’ contributions, controlling for a rich set of father and state characteristics.

Results. Preliminary results indicate that state EITC generosity is associated with increased informal cash support but not formal or in-kind support. A ten-percentage point increase in the state EITC rate is associated with $229 additional dollars of informal cash support annually.

Conclusion. These results point to the importance of examining multiple measures of nonresident fathers’ material contributions to children. Because nonresident fathers are more likely to receive the state EITC if they are resident with a child, next steps in these analyses will focus on how this relationship differs by father’s household composition. The positive association of state EITC with increased material support would provide evidence for positive spillover effects, suggesting policymakers should consider further expansions of EITC eligibility to include nonresident parents.