Report: State Earned Income Tax Credit could boost health of low-income North Carolinians

Report: State Earned Income Tax Credit could boost health of low-income North Carolinians

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[Editor’s note: A new report from the N.C. Budget & Tax Center finds strong evidence that North Carolina could take an important step toward improving the health of its low-income residents by enacting and implementing a refundable state Earned Income Tax Credit. The following is excerpted from the report.]  

A state Earned Income Tax Credit is a common-sense solution to address North Carolina’s poverty-related public health crisis.

Reinstating North Carolina’s Earned Income Tax Credit (EITC) as a refundable credit at the national average of 20 percent of the federal credit has the potential to improve life for the 900,000 North Carolinians who are working for low wages that erect barriers to their economic security and health. The link between poverty and poor health is well established. Generous and fully refundable state-level EITCs, together with their federal counterpart, are associated with improved physical and mental health, maternal and infant health, enhanced nutrition, and community well-being.

  • Maternal and infant health: Mothers receiving the EITC, or increased EITC payments, reported that they benefited from improved physical and mental health and decreased depression scores. Babies in families receiving EITC have higher birth weights. Each year, 361 more North Carolina babies would be born at regular birth weights and would be able to live out healthier lives if the state had an EITC of just 10 percent of the federal credit.
  • Nutrition and community well-being: Receiving EITC is associated with the purchase and consumption of more food and healthier food. The EITC also has been shown to deliver a compounded benefit on health in neighborhoods where large numbers of recipients live in close proximity.
  • Mental and physical health: Receiving EITC is linked to self-reports of improved health among children and heads of households, as well as a decrease in risky biomarkers and depression scores. An EITC set at 10 percent of the federal credit has the potential to save the lives of North Carolinians, as a result of the credit’s association with the reduction of so-called “deaths of despair” suicides.

North Carolina’s EITC made up only a small portion of the state budget in 2013, but it improved life for more than 900,000 North Carolinians. Twenty-nine states plus the District of Columbia and Puerto Rico currently have state-level EITCs that augment the benefits of the federal EITC in reducing poverty and improving health. However, North Carolina is not one of those states. In fact, North Carolina is the only state to have ever eliminated its EITC and undone its positive impact on residents’ health.

Living in poverty is a strong determinant of poor health

Financial stability is foundational to good health. Living in poverty is a strong indicator of both immediate and lifelong poor health outcomes. The EITC is one of the most effective federal policy tools in combating income poverty and its associated negative effects. As it relates to health, the tax credit has the potential to improve infant health and reduce low birth weight and associated infant mortality, to increase access to healthy food and health-promoting environments, to mitigate the rate and impact of chronic disease through increased access to health-promoting factors like nutritious food and insurance uptake, and to reduce toxic stress and its unhealthy associated behaviors and physiological impacts. The relationship between poverty and health is even more pronounced for Black people who, as a result of persistent institutional and structural racism, have lower incomes and shorter life expectancies than their white counterparts.

Income poverty — the experience of lacking adequate income to meet one’s basic needs — has a significantly detrimental impact on both the immediate and lifelong physical and mental health of children and families. Children who experience poverty between their prenatal and fifth year of life are more than twice as likely as their more financially secure peers to report poor health in adulthood. The adverse consequences of poverty persist throughout life for children living in deep poverty. Even early childhood and prenatal poverty are linked to adult health outcomes manifesting as late as an individual’s fourth decade of life.

The relationship between income poverty and health is defined by complex, intersectional factors such as lack of access to a health-promoting environment, heightened exposure to toxic stress, and reduced access to nutritious food and safe areas for exercise that impact both physical and mental health. In addition, people living in poverty are less likely to be insured and have less access to high quality medical care that takes advantage of the latest advances in pharmaceutical treatment and medical technology. The tangible impacts of income poverty are exacerbated by the psychological toll that financial insecurity has on parental mental health, thereby reducing a parent’s ability to have healthy, beneficial interactions with their young children.

The relationship between poverty and health is especially evident in the United States, which has one of the largest income-based health disparities in the world. In the U.S., wealth is increasingly concentrated at the top, driving higher rates of economic inequality. In 2013, families in the top 10 percent of wealth distribution held 76 percent of all family wealth at an average of $4 million, while families at the bottom half of the distribution held just 1 percent of all family wealth and an average of $13,000 in debt. When compared to other Western industrialized countries, the rate of deep child poverty in the U.S., measured at 15 percent of median disposable income, is more than half again as high; Poland is the only country that fares worse.

The link between poverty and health is a self-perpetuating cycle. Income poverty itself increases the odds of negative physical and behavioral health outcomes for individuals in the form of disease and early death. In turn, the costs, lost wages, and lack of economic opportunity associated with poor health also trap individuals in poverty, thus subjecting children to the same poverty in which their parents grew up. Poverty’s impact on health is not vague or tangential; living in poverty is a contributing factor to shorter life spans. U.S. men living at or under the poverty level can expect to die eight years sooner than their counterparts living above 400 percent of the poverty level, while poor women can expect to die more than six years before women living above 400 percent of the poverty level. Poor adults are almost five times as likely to be in poor or only fair health as those with high incomes. Children in the poorest 20 percent of urban populations are twice as likely as children in the richest 20 percent of urban populations to die before their first birthday. Thus, it is morally imperative that we enact policy solutions that mitigate the destructive health impacts of poverty for the 43 percent of North Carolina children currently living in poor or low-income households.

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