The Effects of Earned Income Tax Credit Program on Parenting Stress and Parental Engagement

Background and Purpose

The Earned Income Tax Credit (EITC) policy has been the largest program that reduces poverty among families with children by providing refundable tax credits to low- and moderate-income families. Studies have highlighted EITC’s impact on increasing maternal employment, boosting earnings among low-income women, and improving the health and mental health of both adults and children. Growing literature investigates how EITC influences families, such as finding that EITC improves the home environment for children, housing outcomes, as well as reducing child maltreatment. However, no studies to date have investigated the extent to which EITC influences parental engagement with children and parenting stress, which are crucial mechanisms facilitating positive child development. We leverage the variations in EITC policy rules across states, years, and family sizes to assess the policy effects.

Methods

We use data from the nationally representative Survey of Income and Program Participation (SIPP; 1997-2011; 1996, 2001, 2004, and 2008 panels). We restrict our analysis to guardians/parents aged 18 to 50 with at least one child under 18. We further identify two sub-samples: high-school or less-educated unmarried mothers, and unmarried parents with an income between 50% to 200% of the FPL. These criteria allow us to evaluate EITC policy effects on those who are most likely to benefit from EITC. Our dependent variables are parental engagement and parenting difficulties. EITC benefits, the independent variables, are simulated EITC benefits. We adopt a fixed-effects regression model to analyze the effects of EITC, controlling for various child, guardian, and state characteristics as well as state fixed effects, year fixed effects, and state-specific time trends.

Results

We find that higher EITC benefits increase parental engagement. Such an effect is stronger among mothers with children aged between 3 and 11 years. We further test the robustness of results on two placebo groups: unmarried mothers with a college degree and married mothers with a college degree. The observed effects are indeed modest and not significant among the placebo groups, supporting the robustness of our results. However, higher EITC benefits are not statistically significantly related to parenting stress.

Conclusions and Implications

Findings from this study indicate that, although EITC draws more women to work, it does not detract from the time they spend with children. Instead, we find that the positive impacts of EITC on earnings, income, and health prevail to improve parental engagement. However, it is important to note that EITC did not have a positive effect on parental engagement among families with young children below 2 years old, possibly due to the intensive childcare duties associated with caring for young children. Moreover, while EITC has benefits such as reducing child maltreatment and improving family health, these effects do not lead to a noticeable reduction in parenting stress. Our findings underscore the importance of furthering support for working parents, especially those with young children.