Early claiming of child care tax credits has mixed long-term health effects on children

Early claiming of child care tax credits has mixed long-term health effects on children

The U.S. Child and Dependent Care Tax Credit (CDCTC), which helps offset some of the costs of caring for children or dependents, requires both parents in married households or the primary caregiver in single-parent and divorced households to be in paid employment. Research published in Health Economics shows that early childhood exposure to the CDCTC can influence children's long-term health in complex ways.

The study is based on data from the Child Development Supplement of the Panel Study of Income Dynamics, which began in 1968 with a nationally representative sample of approximately 5,000 families in the United States and continues to survey all family members of the respondents and their descendants to this day.

The researchers found that children and adolescents of mothers with higher levels of education had poorer physical and mental health outcomes when exposed to more intensive CDCTC benefits at a young age. In contrast, children and adolescents with less educated mothers showed improvements in their mental health as a result of such exposure.

The different results may relate to different effects of the CDCTC. An income effect occurs because the CDCTC reduces the cost of child care, effectively increasing the family's disposable income that could be used for nutritious food, better housing, and other services. A substitution effect occurs when the CDCTC pushes mothers into the workforce, resulting in children spending additional hours in formal child care, which can negatively impact the child's health.

This study highlights the need for careful policy approaches that take into account the diverse needs of families of different socioeconomic status.”

Yating Gong, PhD, corresponding author, Jinan University, China

Sources: