Birth and taxes

Lisa Schulkind

A time to be born ... a time to die ... tax policy can affect all kinds of decisions.

Lisa Schulkind (Union College class of 2005, now finishing her PhD at UCSD) and her colleague Teny Maghakian have investigated whether child tax benefits induce parents to move some January births back into December

Their answer is a disturbing one.

Their abstract is below.  The complete paper is available here.  I previously blogged about related work here.

The results suggest serious grounds for concern as the mothers for whom child tax benefits are most economically important are an especially  vulnerable group already at high risk for low-birthweight babies.

For the very same reason, there are statistical challenges to overcome in estimating the effect of tax policy on birthweight, so these papers illustrate the careful econometric detective work needed to make valid inferences from the available data.

There are no easy solutions within our current "everything turns into a pumpkin at midnight December 31" tax policy.  It is tempting to suggest prorating our existing child tax benefits as a solution, but our tax code is already far too byzantine and insanely complicated.

Moving from our current byzantine child tax benefit administration mess to something along the lines of the Canadian child monthly tax benefit model  might address the problem in a simple and straightforward way.  (This would solve all kinds of problems. There might also be less temptation for identity theft and fraudulent filings by taxpayers claiming children who are not actually theirs to claim if we moved to a monthly model as the Canadians do, since would-be identity thieves could no longer just grab a huge yearly pile of money and run.)

What a Difference a Day Makes: A New Look at Child Tax Benefits and the Timing of Births 

Scheduling births for non-medical reasons has become an increasingly common practice in the United States and around the world. We exploit a natural experiment created by child tax benefits, which rewards births that occur just before the new year,  to better understand the full costs of elective c-sections and inductions. Using data on all births in the U.S. from 1990 to 2000, we find that a $1,000 increase in child tax benefits leads to a 1.6 percentage point increase in the percentage of births that occur in December relative to January. Most of the manipulation comes from changes in the timing of c-sections, which leads to an increase in the likelihood of the baby being born of low birthweight.