City, State Tax Credits Boosted Health in Low-Income Neighborhoods



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During his administration, Mayor Bloomberg won accolades not so much for his vow to reduce poverty but rather for the way he tried to accomplish that goal: through a battery of mostly small, pilot projects designed to find innovative ways to attack that stubborn problem. But new evidence suggests that an old idea that Bloomberg implemented at the behest of a political rival had a significant effect on the lives of low-income New Yorkers.

A study released last week by the Political Economy Research Institute (PERI) at the University of Massachusetts finds that changes to the Earned Income Tax Credit by New York State and City appear to have reduced the incidence of low-birth weight in the city's low-income neighborhoods.

The Earned Income Tax Credit, or EITC, began on the federal level in 1975, aimed at families with low incomes obtained through work. The credit, which is based on a filer's income and family size, is refundable: If a household qualifies for more credit than they owe the government in taxes, the government cuts a check to the household for the difference. EITC has been the rare anti-poverty program to enjoy bipartisan support, with liberals liking it because it it redistributes money to the poor and conservatives supporting it because it bases eligibility on work.

New York State launched its own EITC in 1994 and has made it more generous since. After an effort led by then-Council Speaker Gifford Miller, New York City began its own version in 2004.

The PERI study looks at 90 low- and middle-income ZIP codes in New York City over the 1997-2010 period and charts in each neighborhood the receipt of EITC benefits and statistics on low birth-weight, prenatal care and pediatric asthma hospitalizations. The findings?

We estimate that, while controlling for trends in low birth weight rates among NYC middle-income neighborhoods as well as Black and Latino Connecticut households, a 10- percentage point increase in the local EITC rate (New York State and City’s combined) reduces low birth weight rates in the range of 0.3 percentage points. Over the time period of our study, the New York State and New York City EITC rates combined increased from 20 percent to 35 percent by 2004. Our estimates indicate that these rate increases would lead to a 0.45 percentage-point reduction in low birth weight rates.

The authors point out that with 9 to 9.8 percent of births coming it at low weight, a reduction of .45 points would be significant.

While results on birth weight were strong, there was scant evidence of any impact on asthma or prenatal care. The researches suggest that this is because those health outcomes are harder to change than low-birth weight. Individual women with more money to spend can affect their children's birth weight directly, but reducing asthma requires longer-term health interventions and expanding prenatal care involves not just individual families but healthcare systems.

PERI's results could inform several ongoing policy debates. The health of low-income neighborhoods became a focus of increased public concern during the Bloomberg years, triggering programs to put better milk in bodegas and reduce the size of sugar-laced sodas—and leading to debates about how best to equip low-income households to make better choices. It seems EITC is one helpful piece of equipment.

On the other hand, some conservatives have been moving away from the right's traditional support for EITC—driven by a school of thought that the vast amount of money spent on federal anti-poverty programs since the 1960s has been wasted because poverty persists. PERI's results, among others, suggest that while they have not ended poverty, programs like EITC have meaningfully changed what it means to live in it.

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