The Costs and Benefits of a Child Allowance - Squarespace
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
The Costs and Benefits of a Child Allowance
I. Introduction
II. Child Allowances and Tax Credits: Brief International and Historical Context
III. Expected Costs and Benefits and Empirical Methodology III.A. Expected Costs and Benefits Table 1 Conceptual table of benefits (+) and costs (-) of a child allowance
Table 1 Conceptual table of benefits (+) and costs (-) of a child allowance (continued)
3
III.B. Empirical Methodology III.B.1. Similarity of impacts of all cash and near cash benefits
4 IV. Measuring Impacts: Study Summaries, Findings, Data, Methods, and Standardization
Table 2: Estimated Impacts of a $1,000 Increase in Household Income as a Result of a Cash or Near-cash Transfer
IV.A. Children’s Future Earnings IV.A.1. Aizer et al. (2016) Summary Calculations
0 0 127 127 = ∑ =0 (1+ ) = (1+0.03)1 + (1+0.03)2 + ⋯ + (1+0.03)11 + ⋯ + (1+0.03)53 (1) IV.A.2. Hoynes et al. (2016) Summary Calculations
IV.A.3. Bastian & Michelmore (2018) Summary Calculations IV.A.4. Bailey et al. (2020) Summary
Calculations IV.A.5. Price & Song (2018) Summary Calculations
IV.B. Children’s Taxes IV.C. Children’s Health IV.C.1. Monetizing the value of life and health
IV.C.2. Neonatal Mortality IV.C.2.a. Almond et al. (2011) Summary Calculations
IV.C.3. Children’s health age 1 to death IV.C.3.a. Averett & Wang (2018) Summary 6 Calculations 6
IV.C.3.b. Hoynes et al. (2016) Summary Calculations We use Hoynes et al. (2016)’s IV.C.3.c. Bailey et al. (2020) Summary
Calculations IV.C.4. Child longevity IV.C.4.a. Aizer et al. (2016) Summary Calculations IV.C.4.b. Bailey et al (2020) Summary
Calculations IV.D. Reduced Health Expenditures for Children IV.D.1. Healthcare expenditures in first 6 months of life and low birthweight IV.D.1.a. Beam et al. (2020)
IV.D.2. Healthcare expenditure “elasticity”7 7
IV.D.3. Healthcare expenditures age 6 months till death 8 IV.E. Increases in Parent Health
IV.E.1. Self-rated Overall Health and Physical Health IV.E.1.a. Larrimore (2008) Summary Calculations 58 58 58 (19∗58+1∗(58+(1+0.03)1 +(1+0.03)2 +⋯+(1+0.03)33 )) (2) 20
IV.E.1.b. Evans & Garthwaite (2014) Summary Calculations IV.E.1.c. Morgan et al. (2020) Summary
IV.E.2. Longevity or Mortality IV.E.2.a. Price & Song (2018) Summary Calculations
Calculations IV.E.2.b. Chetty et al. (2016) Summary
Calculations IV.F. Reduced Health Expenditures for Parents 5.78 5.78 5.78 10.94 10.94 (19∗3.05+1∗(5.78+(1+0.03)1 +(1+0.03)2 +⋯+(1+0.03)19 +(1+0.03)20 +⋯+(1+0.03)33 )) 20 × 0.9 (3)
IV.G. Child Welfare IV.G.1. Berger et al. (2017) Summary Calculations IV.H. Other Transfers
Calculations IV.I. Decreases in Crime IV.I.1. Heckman et al. (2010) and the Value of Crime Reduction
IV.I. 3. Bailey et al. (2019) Summary Calculations IV.J. Decreased Parent Taxes V. Converting Impacts Estimates to Aggregate Estimates of Present Discounted Values of Costs and Benefits
V.A. Benefits and Costs of a Child Tax Credit Per $1,000 Increase in Household Income
Table 3: Present Discounted Value of Monetary Benefits and Costs of a Child Tax Credit per $1,000 Increase in Household Income: Using Mean Impact Estimates
IV.B. How Much Benefits Decline as Income Increases
Calculations 12
V.C. Micro-Simulation Estimates V.C.1.Costs and Distribution of Gross and Net Benefits 13 14 15 16 Table 5: Cost of a fully-refundable federal Child Tax Credit of $2,000 without an earnings requirement ($billions, annual) 13 14 15 16
17 18 19 Table 6: Net increase in credit/allowance amount from a fully-refundable federal Child Tax Credit of $2,000 per family and per child (annual) Table 7: Cost of the American Family Act ($billions, annual) 17 18 19
Table 8: Net increase in credit/allowance amount from the American Family (annual) V.C.2. Reductions in Work and Earnings 20 Table 9: Income Elasticity of Employment and Hours 20
Table 10: Income Elasticity of Employment and Hours V.C.3.Reductions in Child Poverty V.D. Aggregate Costs and Benefits of Making the Tax Credit Fully Refundable and the American Family Act 21
Table 11: Present Discounted Value of Aggregate Monetary Benefits and Costs of a Fully- Refundable Federal Child Tax Credit (in $Billions)
22 Table 12: Present Discounted Value of Aggregate Monetary Benefits and Costs of the American Family Act: Using Mean Impact Estimates (in $Billions)
VI. Sensitivity Analyses
Table 13: Sensitivity Analysis Results
VII. Summary and Conclusion
References Aizer, A., Eli, S., Ferrie, J., & Lleras-Muney, A. (2016). The Long-Run impact of cash transfers to poor families. American Economic Review, 106(4), 935–971. https://doi.org/10.1257/aer.20140529 Akee, R. K. Q., Copeland, W. E., Keeler, G., Angold, A., & Costello, E. J. (2010). Parents’ incomes and children’s outcomes: A quasi-experiment using transfer payments from casino profits. American Economic Journal: Applied Economics, 2(1), 86–115. https://doi.org/10.1257/app.2.1.86 Almond, D., Hoynes, H. W., & Schanzenbach, D. W. (2011). Inside the war on poverty: The impact of food stamps on birth outcomes. Review of Economics and Statistics, 93(2), 387–403. https://doi.org/10.1162/REST_a_00089 Averett, S., & Wang, Y. (2018). Effects of Higher EITC Payments on Children’s Health, Quality of Home Environment, and Noncognitive Skills. Public Finance Review, 46(4), 519–557. https://doi.org/10.1177/1091142116654965 Bailey, M. J., Hoynes, H., Rossin-Slater, M., & Walker, R. (2019). Is the Social Safety Net a Long-Term Investment? Large-Scale Evidence from the Food Stamps Program. Goldman School of Public Policy Working Paper. https://www.acf.hhs.gov/ofa/resource/tanf-financial-data-fy-2016 Bailey, M. J., Hoynes, H. W., Rossin-Slater, M., & Walker, R. (2020). IS THE SOCIAL SAFETY NET A LONG-TERM INVESTMENT? LARGE-SCALE EVIDENCE FROM THE FOOD STAMPS PROGRAM. NBER WORKING PAPER SERIES IS, Working Pa. Bastian, J., & Michelmore, K. (2018). The long-term impact of the earned income tax credit on children’s education and employment outcomes. Journal of Labor Economics, 36(4), 1127–1163. https://doi.org/10.1086/697477 Beam, A. L., Fried, I., Palmer, N., Agniel, D., Brat, G., Fox, K., Kohane, I., Sinaiko, A., Zupancic, J. A. F., & Armstrong, J. (2020). Estimates of healthcare spending for preterm and low-birthweight infants in a commercially insured population: 2008–2016. Journal of Perinatology, 40(7), 1091– 1099. https://doi.org/10.1038/s41372-020-0635-z Berger, L. M., Font, S. A., Slack, K. S., & Waldfogel, J. (2017). Income and child maltreatment in unmarried families: Evidence from the Earned Income Tax Credit. Review of Economics of the Household, 15(4), 1345–1372. Boyd-Swan, C., Herbst, C. M., Ifcher, J., & Zarghamee, H. (2016). The earned income tax credit, mental health, and happiness. Journal of Economic Behavior and Organization, 126, 18–38. https://doi.org/10.1016/j.jebo.2015.11.004 Center on Poverty and Social Policy, C. U. (2021). A Poverty Reduction Analysis of the American Family Act. Poverty and Social Policy Fact Sheet. Centers for Medicare & Medicaid Services. (2019). Health Expenditures by Age and Gender. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/Age-and-Gender
Centers for Medicare & Medicaid Services. (2020). National Health Expenditure Data: Projected. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/NationalHealthAccountsProjected Chern, J., Wan, T. T. H., & Begun, J. W. (2002). A Structural Equation Modeling Approach to Examining the Predictive Power of Determinants of Individuals ’ Health Expenditures. Journal of Medical Systems, 26(4), 323–336. Chetty, R., Stepner, M., Abraham, S., Lin, S., Scuderi, B., Turner, N., Bergeron, A., & Cutler, D. (2016). The association between income and life expectancy in the United States, 2001-2014. JAMA - Journal of the American Medical Association, 315(16), 1750–1766. https://doi.org/10.1001/jama.2016.4226 Collyer, S., Curran, M. A., Garfinkel, I., Harris, D., Stabile, M., & Waldfogel, J. (2020). What a Child Allowance Like Canada’s Would Do for Child Poverty in America. The Century Foundation. https://tcf.org/content/report/what-a-child-allowance-like-canadas-would-do-for-child-poverty-in- america/ Currie, B. J., & Cole, N. (1993). Welfare and Child Health : The Link Between AFDC Participation and Birth Weight. The American Economic Review, 83(4), 971–985. Eissa, N., & Hoynes, H. W. (2006). Behavioral Responses to Taxes: Lessons from the EITC and Labor Supply. Tax Policy and the Economy, 20, 73–110. https://doi.org/10.1086/tpe.20.20061905 Environmental Protection Agency. (n.d.). Mortality Risk Valuation. Retrieved October 7, 2020, from https://www.epa.gov/environmental-economics/mortality-risk-valuation#whatvalue Evans, W. N., & Garthwaite, C. L. (2014). Giving mom a break: The impact of higher EITC payments on maternal health. American Economic Journal: Economic Policy, 6(2), 258–290. https://doi.org/10.1257/pol.6.2.258 Fang, X., Brown, D. S., Florence, C. S., & Mercy, J. A. (2012). Child Abuse & Neglect The economic burden of child maltreatment in the United States and implications for prevention ଝ , ଝଝ. Child Abuse & Neglect, 36(2), 156–165. https://doi.org/10.1016/j.chiabu.2011.10.006 Flood, S., King, M., Rodgers, R., Ruggles, S., & Warren, J. R. (2020). Integrated Public Use Microdata Series, Current Population Survey: Version 7.0. IPUMS. https://doi.org/10.18128/D030.V7 Gangopadhyaya, A., Blavin, F., Braga, B., & Gates, J. (2020). Credit where it is due: Investigating pathways from earned income tax credit expansion to maternal mental health. Health Economics (United Kingdom), April, 1–17. https://doi.org/10.1002/hec.4034 Garfinkel, I., Rainwater, L., & Smeeding, T. M. (2010). Wealth and welfare states : is America a laggard or leader? Oxford University Press. Gold, M. R., Patrick, D. L., Torrance, G. W., Fryback, D. G., Hadorn, D. C., Kamlet, M. S., Daniels, N., & Weinstein, M. C. (1996). Identifying and Valuing Outcomes. In M. R. Gold, J. E. Siegel, L. B. Russell, & M. C. Weinstein (Eds.), Cost-Effectiveness in Health and Medicine (pp. 82–134). Oxford University Press. Heckman, J. J., Moon, S. H., Pinto, R., Savelyev, P. A., & Yavitz, A. (2010). The rate of return to the HighScope Perry Preschool Program. Journal of Public Economics, 94(1–2), 114–128. https://doi.org/10.1016/j.jpubeco.2009.11.001 Hoynes, B. H., Miller, D., & Simon, D. (2015). American Economic Association Income , the Earned Income Tax Credit , and Infant Health. 7(1), 172–211.
Hoynes, H., Schanzenbach, D. W., & Almond, D. (2016). Long-Run impacts of childhood access to the safety net. American Economic Review, 106(4), 903–934. https://doi.org/10.1257/aer.20130375 Internal Revenue Service. (2019). EITC participation rate by states. https://www.eitc.irs.gov/eitc- central/participation-rate/eitc-participation-rate-by-states Joint Committee on Taxation. (2019). Estimates of Federal Tax Expenditures for Fiscal Years 2019-2023 JCX-55-19. Kehrer, B. H., & Wolin, C. M. (1979). Impact of Income Maintenance on Low Birth Weight : Evidence from the Gary Experiment. The Journal of Human Resources, 14(4), 434–462. Kneebone, E. (2007). A Local Ladder for Low-Income Workers: Recent Trends in the Earned Income Tax Credit. Bookings Institute. Larrimore, J. (2008). Does a Higher Income Have Positive Health Effects? Using the Earned Income Tax Credit to Explore the Income-Health Gradient. The Milbank Quarterly, 86(4), 529–532. https://doi.org/10.1111/j.1468-0009.2008.00538.x Lima, V. D., & Kopec, J. A. (2005). Quantifying the effect of health status on health care utilization using a preference-based health measure. Social Science and Medicine, 60, 515–524. https://doi.org/10.1016/j.socscimed.2004.05.024 Lochner, L., & Moretti, E. (2004). The Effect of Education on Crime : Evidence from Prison Inmates , Arrests , and Self-Reports. The American Economic Review, 94(1), 155–189. Løken, K. V., Mogstad, M., & Wiswall, M. (2012). What linear estimators miss: The effects of family income on child outcomes. American Economic Journal: Applied Economics, 4(2), 1–35. https://doi.org/10.1257/app.4.2.1 Markowitz, S., Komro, K. A., Livingston, M. D., Lenhart, O., & Wagenaar, A. C. (2017). Effects of state- level Earned Income Tax Credit laws in the U.S. on maternal health behaviors and infant health outcomes. Social Science and Medicine, 194(October), 67–75. https://doi.org/10.1016/j.socscimed.2017.10.016 Maxfield, M. (2013). The Effects of the Earned Income Tax Credit on Child Achievement and Long- Term Educational Attainment. Michigan State University, Job Market Paper, 1–48. https://msu.edu/~maxfiel7/20131114 Maxfield EITC Child Education.pdf Michelmore, K. (2014). The Effect of Income on Educational Attainment: Evidence from State Earned Income Tax Credit Expansions. SSRN Electronic Journal, January. https://doi.org/10.2139/ssrn.2356444 Morgan, E. R., Hill, H. D., Mooney, S., Rivara, F. P., & Rowhani-rahbar, A. (2020). State earned income tax credits and general health indicators : A quasi-experimental national study 1993-2016. Health Services Research, 00, 1–10. https://doi.org/10.1111/1475-6773.13307 National Academies of Sciences Engineering and Medicine. (2019). A Roadmap to Reducing Child Poverty. In A Roadmap to Reducing Child Poverty. The National Academies Press. https://doi.org/10.17226/25246 Okun, A. (1975). Equality and Efficiency: The Big Tradeoff. Brookings Institute Press. Page, B. I., & Jacobs, L. R. (2009). Class war? What Americans really think about economic inequality. University of Chicago Press.
Price, D., & Song, J. (2018). The Long-Term Effects of Cash Assistance. Princeton University Industrial Relations Section, Working Paper #621. http://davidjonathanprice.com/docs/djprice_jsong_simedime.pdfhttp://davidjonathanprice.com/docs/ djprice_jsong_simedime_appendix.pdf46 Scott, C., & Crandall-Hollick, M. L. (2014). The earned income tax credit (EITC): An overview. In The Earned Income Tax Credit: An Overview. Snyder, S. E., & Evans, W. N. (2006). The effect of income on mortality: Evidence from the social security Notch. Review of Economics and Statistics, 88(3), 482–495. https://doi.org/10.1162/rest.88.3.482 The U.S. Department of Transportation. (2016). Treatment of the value of preventing fatalities and injuries in preparing economic analyses. https://www.transportation.gov/sites/dot.gov/files/docs/2016 Revised Value of a Statistical Life Guidance.pdf Thompson, O. (2019). Tribal Gaming and Educational Outcomes in the Next Generation. Journal of Policy Analysis and Management, 38(3), 629–652. https://doi.org/10.1002/pam.22129 U.S. Department of Health and Human Services. (2002). Food Stamp Program. https://aspe.hhs.gov/system/files/pdf/174396/appa-FS.pdf Wamhoff, S., & Gardner, M. (2019). Who pays taxes in America in 2019? Institute on Taxation and Economic Policy. https://itep.org/who-pays-taxes-in-america-in-2019/ Wheaton, L., & Stevens, K. (2016). The Effect of Different Tax Calculators on the Supplemental Poverty Measure. United States Census Bureau. https://www.census.gov/library/working- papers/2016/demo/wheaton-stevens-2016.html Whitmore, D. (2002). What Are Food Stamps Worth? PRINCETON UNIVERSITY INDUSTRIAL RELATIONS SECTION, PA. http://www.irs.princeton.edu/pubs/working_papers.html%0AWhat
Appendix 1: Literature Search Methodology
1B. Search Terms used: Children’s earnings Children’s health/longevity Parent health/longevity Crime Parent mental health Children’s educational attainment 1C. Explanation of why papers were cut in Stage 3
Appendix 2: Impact Literature A2.a. Birthweight A2.a.1. Kehrer & Wolin (1979) Summary Calculations A2.a.2. Almond et al. (2011) Summary
Calculations A2.a.3. Hoynes et al. (2015) Summary Calculations A2.a.4. Markowitz et al. (2017) Summary
Calculations A2.b. Parent Mental Health Literature A2.b.1. Boyd-Swan et al. (2016) Summary Calculations.
A2.b.2. Gangopadhyaya et al. (2020) Summary Calculations A2.c. Childhood Education Attainment Literature A2.c.1. Akee et al. (2010) Summary.
Calculations A2.c.2. Maxfield (2013) Summary Calculations
A2.c.3. Michelmore (2014) Summary Calculations A2.c.4. Hoynes et al. (2016) Summary
A2.c.5. Aizer et al. (2016) Summary Calculations A2.c.6. Bastian & Michelmore (2018) Summary Calculations
A2.c.7. Thompson (2019) Summary Calculations
Appendix 3: Impact of earnings on other transfers received
The Costs and Benefits of a Child Allowance Suggested Citation Garfinkel, Irwin, Laurel Sariscsany, Elizabeth Ananat, Sophie Collyer, and Christopher Wimer. 2021. "The Costs and Benefits of a Child Allowance." Poverty and Social Policy Discussion Paper. Center on Poverty and Social Policy, Columbia University. www.povertycenter.columbia.edu/news- internal/2021/child-allowance/cost-benefit-analysis Acknowledgments The work of the Center on Poverty and Social Policy is supported by Robin Hood. We also thank Jason Cone and Loris Toribio for initiating the study, Derek Kaufman for providing helpful comments, Stacie Tao for research assistance and Sonia Huq for help preparing this brief. The Center on Poverty and Social Policy at the Columbia School of Social Work produces cutting-edge research to advance our understanding of poverty and the role of social policy in reducing poverty and promoting opportunity, economic security, and individual and family-wellbeing. The center’s work focuses on poverty and social policy issues in New York City and the United States. For the latest policy briefs, go to povertycenter.columbia.edu. Follow us @cpsppoverty. 64 | P a g e
You can also read
