Scott in comments yesterday raised an interesting scenario that has been marinating in the back of my mind for a while now:
My son and wife had their daughter on 31 Dec by inducement a year ago (date chosen for purely financial reasons as the scheduled inducement was for 3 Jan until they realized that deductibles, etc reset at 1 Jan.
I am curious if researchers have been able to leverage the January 1 reset day as a means of evaluating the effectiveness of the Earned Income Tax Credit and other child related tax code features?
My now 11 year old daughter is a mid-afternoon New Years Day baby. She was due on the 28th or the 29th. She decided to take her time. We had a low deductible plan that rolled over into a high deductible plan at 12:01 AM on January 1st. She was ready to greet us well after that threshold was crossed. Between the deductible resetting and our inability to claim her as a dependent and get child tax credits for a December birth, she cost us several thousand dollars in a year where we knew that we were going to be stretched thin.
The deductible hit was immediate. I think we got the bill three weeks after birth. We were able to claim her as a tax deduction fourteen months after birth instead of two months after birth if she had been born eighteen hours earlier.
I am curious if there is research that looks at long term outcomes using the January 1st birth eligibility discontinuity as there is a huge swing in very early life parental financial resources available. Kids who were born on December 30th or 31st are fundamentally similar to kids born on January 1 or January 2 except for the presence of a significant resource infusion due to a policy cut-off. I would expect that we should see the late December kids to have better outcomes than the early January kids because their parents will have significantly more financial resources in the first three to six months of the baby’s life. More resources might translate into less parental stress which could lead to better bonding and security for the infant. Another pathway could be simply that the baby’s diaper gets changed more often as there is more cash to buy diapers and therefore the risks of abuse are lowered. I’m speculating here but I am truly curious.