A new empirical economic study (go here and here) by Alexander Gelber and Matthew Weinzierl says that some tax policies that put more money in the pocket of low-income U.S. parents are associated positively with their children's academic abilities. This study comes at an interesting time given the recent debate about whether there should be some minimal level of income taxation for all Americans (or at least all U.S. wage earners).
This Gelber-Weinzierl study looks at the earned income tax credit (EITC), the principal U.S. tax policy that benefits low-income working families. The EITC is one of the few income tax credits that is refundable — that is, certain taxpayers entitled to the credit not only lower their tax liabilty, but get the EITC back from the government even when the amount of the credit they are due exceeds what they have paid in taxes. And, the EITC operates as a negative income tax — that is, many low-income earners entitled to the EITC receive more in the refundable credit than they have paid in taxes. In fact, low-income earners can be eligible for the EITC when, because of their low income, they have paid no income taxes at all. If we were to force all U.S. earners to owe some income tax, we would have to eliminate this important aspect of the EITC.
The EITC lifts more families out of poverty than any other social program, including food stamps and various housing subsidies.