May 2018| By Jeannie Donovan, Carmen Green| 3 min

Bigger state Earned Income Tax Credits linked to healthier babies

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As many as 196 babies in Louisiana a year could be saved from risky low birth weight births and the accompanying health risks, if state lawmakers increase the state’s Earned Income Tax Credit (EITC), according to the findings of a recent study. Louisiana’s state EITC is a commonsense way for the state to help working families afford the basics, and in doing so, improve health outcomes. While prior research has shown that the federal EITC improves maternal and infant health outcomes, the new study by researchers at Emory University looked specifically at the impact of state-level EITCs on infant birth weights and other birth outcomes. The study finds evidence that state Earned Income Tax Credits have a statistically significant positive impact on birth weight of babies born in a state.

Federal and state Earned Income Tax Credits

The federal EITC was established with bipartisan support in the 1970s, as a way to offer a hand up to working families earning low pay. Since then, Congress has expanded the credit multiple times, and twenty-nine states and the District of Columbia have established state-based credits to complement the federal EITC. State EITCs range from 3 percent of the federal credit in Montana to 40 percent in Washington D.C. Louisiana’s refundable state EITC is currently 3.5 percent of the federal credit, one of the lowest in the country.  

The effects of low birth weights

In 2015, Louisiana had the second highest rate of low birth weight babies in the country at 10.6 percent, compared to the national average of 8.1 percent. Of the 64,692 babies born in the state that year, 6,859 weighed below 2,500 grams – the minimum weight for a healthy newborn.

Research shows that a healthy birth weight is tied to many positive outcomes, including children doing better in school and earning higher wages. Alternatively, low birth weight can cause a range of serious health problems. It can result in a baby having trouble eating, gaining weight and fighting off infections. Some low-birthweight babies have long-term health problems, including chronic conditions like diabetes, heart disease and intellectual and developmental disabilities.

Linking the EITC & infant birth weights

The Emory study finds that the growth in state EITCs across the country is associated with an increase in number of babies born at a healthy weight. Particularly important to this outcome is “refundability,” which means that a family gets the full value of the credit they earned through work, regardless of their income tax liability.

Currently, Louisiana has a “low, refundable EITC” as classified by the Emory study.  The existing credit is already having a positive impact on maternal and child health in Louisiana: Low, refundable EITCs like Louisiana’s were found to decrease a state’s rate of low birth weight babies by  .5 percentage points.

By increasing Louisiana’s EITC to 10 percent or above, the state could even further reduce the rate of low birth weight babies. Refundable state EITCs at 10 percent of the federal EITC or higher are associated with a drop in a state’s rate of low birth weight of .8 percentage points. If Louisiana’s low birth weight rate dropped by an additional .3 percentage points, 196 children born in Louisiana each year would have a greater chance at a healthy weight and a healthy start.

It’s rare to have research that underscores the sheer power of a policy like Louisiana has with its EITC. Boosting the size of the state credit to 10 percent could have tangible positive effects on the lives of nearly 200 children born each year in our state at a low birth weight, setting them on a healthier life trajectory. It would also help mitigate the impact of a sales tax renewal to solve the state’s budgets shortfall. An increased EITC is a win-win for Louisiana.

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