Tax Credit Refundability Would Yield Economic, Education, and Health Benefits

(Columbus, OH) – On Friday, Scioto Analysis released a cost-benefit analysis of proposals to make Ohio’s earned income tax credit refundable.

The cost-benefit analysis incorporated findings from policy research studying past earned income tax credit expansions and elements of its design to measure human development impacts of the policy.

“In this analysis, we found that refundability reforms would put an extra $150 to $900 in the pocket of the average low-income Ohioan,” said Rob Moore, principal for Scioto Analysis. "It would also bring anywhere from 3,000 to 60,000 new workers into the workforce, would prevent 20 to 120 cases of low infant birthweight per year, and would lead to 40-230 new college enrollments every year, generating anywhere from a $5 to $130 million in new economic activity,”

This analysis sheds new light on the state earned income tax credit, showing for the first time that human development benefits tied to education and health outweigh the tax distortion costs and potential labor market costs levied by the earned income tax credit.

“In all 10,000 simulations we ran of the change from a 30% nonrefundable to a 10% refundable tax credit, we found the change in policy would have net economic benefits,” said Tong Zhou, co-author of the analysis. “This was also the case in all but 7 of the 10,000 simulations we ran of the change to a more robust 40% refundable tax credit.”

This paper represents the first best-practices cost-benefit analysis on a state policy in Ohio in over a decade. Scioto Analysis looks forward to promoting the use of more cost-benefit analysis in the upcoming years.

For more information, please contact Rob Moore, principal, Scioto Analysis, (614) 743-1840,