How A Low-Income Tax Credit Boosts Children’s Education And Future Earnings

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"How A Low-Income Tax Credit Boosts Children’s Education And Future Earnings"

President Obama’s latest budget doesn’t just take aim at the tax code by raising $580 billion in new revenues by closing loopholes, limiting deductions for the wealthy, and instituting the Buffett Rule. It also made the expansion of the Earned Income Tax Credit (EITC) included in the 2009 stimulus package permanent. This refundable credit is aimed at giving poor and working people more income. But research also shows that the benefits extend beyond the workers to their children.

The Center on Budget and Policy Priorities found that the children of EITC recipients do better in school, are likelier to go to college, and earn more when they enter the workforce:

As the graphic above illustrates, for every $3,000 in EITC income a family receives, a child goes on to work 135 more hours a year as an adult and to earn 17 percent more. Beyond educational and financial outcomes, the children who live in families that receive EITC credits are likely to avoid the early onset of disabilities and other illnesses that are associated with child poverty. The EITC may also help infants by reducing low-weight and premature births.

Interestingly, the EITC can have similar benefits for parents by boosting their employment rates. Overall, income from the EITC and the Child Tax Credit kept about 10 million people out of poverty in 2011. Many of those people, 1.5 million, owe their eligibility for the credit to the stimulus’ expansion, the one that Obama is seeking to make permanent. Republicans, for their part, have repeatedly tried to roll back that expansion, which could have serious impact on low-income parents and their kids.

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