Potential mechanisms linking poverty alleviation and health: an analysis of benefit spending among recipients of the U.S. earned income tax credit

Abstract

Background: The earned income tax credit (EITC) is the largest U.S. poverty alleviation program for low-income families, disbursed annually as a lump-sum tax refund. Despite its well-documented health impacts, the mechanisms through which the EITC affects health are not well understood. The objective of this analysis was to examine self-reported spending patterns of tax refunds among EITC recipients to clarify potential pathways through which income may affect health. Methods: We first examined spending patterns among 2020–2021 Assessing California Communities’ Experiences with Safety Net Supports (ACCESS) study participants (N = 241) and then stratified the analysis by key demographic subgroups. Results: More than half of EITC recipients reported spending their tax refunds on bills and debt (52.3%), followed by 49.4% on housing, and 37.8% on vehicles. Only 3.3% reported spending on healthcare. (Note: respondents could list more than one possible spending category.) Participants ages 30 + were more likely to spend on bills and debt relative to those ages 18–29 (57.6% versus 39.4%, respectively). Other subgroup analyses did not yield significant findings. Conclusions: Our findings suggest that EITC recipients primarily use their refunds on bills and debt, as well as on household and vehicle expenses. This supports the idea of the EITC as a safety net policy which addresses key social determinants of health.