The impact of refundable state earned income tax credits on foster care entry rate trends.

Background: Children living in poverty are more likely to enter foster care compared to children not living in poverty. Refundable state Earned Income Tax Credits (EITCs) increase household income and have been shown to reduce the risk of child maltreatment using caregiver-reported and administrative records of child protective services investigations; however, there is limited literature on the impact of refundable state EITCs on foster care entry.

Objective: To evaluate the impact of refundable state EITCs on foster care entry rates at the state-level.

Participants And Setting: Foster care entries among children less than 18 years old in the United States.

Methods: Difference-in-difference analyses using the Callaway and Sant'Anna approach were conducted. Data on EITC refundability was extracted from legislative records and foster care entries were obtained from Kids Count for 2000-2019. State-level policies, including Medicaid expansion, paid family leave, minimum wage, Temporary Assistance for Needy Families, and the Supplemental Nutrition Assistance Program, were included in the analysis to minimize bias from confounding.

Results: On average, 0.5 fewer children entered foster care (95 % CI: -1.0, -0.1) per 1000 children per year among states that implemented a refundable EITC than there would have been had those states not implemented a refundable EITC. The reduction in foster care entries was not statistically significant until six years after families could first benefit from implementation of a state refundable EITC.

Conclusion: A refundable state EITC reduces the rate of foster care entries. This reduction is statistically significant starting six years after the tax credit is implemented in a state.