On Tuesday night, President Barack Obama used his fifth State of the Union address to propose an expansion of the Earned Income Tax Credit (EITC) to the childless working poor. In addition to offering low-income workers financial stability, a new white paper by the Federal Reserve Bank of Chicago suggests that policy could boost healthier eating habits.
Government benefits like food stamps are generally paid out over time. What makes the EITC unique is that it’s paid in a lump sum in the form of a refundable tax credit in late winter or early spring, explain authors Leslie McGranahan and Diane W. Schanzenbach. McGranahan and Schanzenbach analyzed the spending habits for EITC beneficiaries in the months that the tax credit is typically paid out, focusing on the types of food and groceries they buy.
The results were striking. Working poor families spent significantly more money on healthy products including fish, poultry, meat, and dairy in the months that they received their benefits. There was almost no corresponding rise in the amount of fat-laden fast and junk foods that they purchased.
“We find that eligible households do spend more on food, and particularly on healthy foods in those months when most benefits are paid,” wrote the researchers. “These findings are consistent with a growing literature that shows that low-income individuals make better food choices when they are less constrained. Low income individuals eat healthier food when it is more accessible. Recent interventions have shown that households purchase more healthy food when it is more readily available or when it is relatively cheaper. We add to this discussion by finding that they also purchase more healthy foods when they have more income.”
Many low-income Americans don’t live in areas with easy access to grocery stores or supermarkets that sell fresh produce and healthy food. In fact, the average SNAP recipient lives almost two miles away from a grocery store and doesn’t own a car, forcing them to rely on cheap fast food chains and mini-marts that sell processed and sodium- and fat-laden food. That’s one of the factors contributing to a trend where low-income people suffer from disproportionate rates of preventable diet-related medical conditions, including obesity and diabetes.
The new Chicago Fed paper adds to the evidence that increasing access to healthy food — including by providing more money to afford such products — can go a long way in encouraging a healthier lifestyle. One SNAP pilot program called the U.S. Healthy Incentives Program (HIP) gave food stamp beneficiaries a 30 percent discount for buying healthy food; the recipients ended up eating 25 percent more vegetables with their benefits.
The authors conclude with a warning for lawmakers. “This finding also suggests that decreases in resources, as occurred recently through the reduction in SNAP benefits, may have the effect of reducing the diet quality of low income families.” Congress recently reached a deal on a farm bill that would cut SNAP benefits by $8 billion over a decade.
Earlier research on the EITC has shown that children in families that benefit from the credit go on to attain more educational success and earn more money once they enter the workforce.