New Evidence on Taxes and the Timing of Birth
American Economic Journal: Economic Policy
vol. 7,
no. 2, May 2015
(pp. 258-93)
(Complimentary)
Abstract
This paper uses data from the universe of tax returns filed between 2001 and 2010 to test whether parents shift the timing of childbirth around the New Year to gain tax benefits. Filers have an incentive to shift births from early January into late December, through induction or cesarean delivery, because child-related tax benefits are not prorated. We find evidence of a positive, but very small, effect of tax incentives on birth timing. An additional $1,000 of tax benefits increases the probability of a late-December birth by only about 1 percentage point. We argue that the response to tax incentives is small in part because of confusion about eligibility and delays in the issuance of Social Security numbers for newborns, as well as a lack of control over medical procedures on the part of filers with the highest tax values. In contrast to this small behavioral response, we do document a substantial reporting response among self-employed parents facing changes in the Earned Income Tax Credit as a result of a child's birth. We estimate that this reporting response reduces federal revenue by hundreds of millions of dollars per year. (JEL H24, H31, J13, J23)Citation
LaLumia, Sara, James M. Sallee, and Nicholas Turner. 2015. "New Evidence on Taxes and the Timing of Birth." American Economic Journal: Economic Policy, 7 (2): 258-93. DOI: 10.1257/pol.20130243Additional Materials
JEL Classification
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H31 Fiscal Policies and Behavior of Economic Agents: Household
- J13 Fertility; Family Planning; Child Care; Children; Youth
- J23 Labor Demand
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