In Tax Year 2004, tax filers claimed almost $40 billion through the Earned Income Tax Credit (EITC), making the EITC one of the largest federal programs that provides cash supports to low-income working families in the United States. This Fact Sheet examines rural/urban differences in the Federal EITC program

Elizabeth Kneebone

William O'Hare

In the 2004 tax year, tax filers claimed almost $40 billion through the Earned Income Tax Credit (EITC), making the EITC one of the largest federal programs that provides cash supports to low-income working families in the United States. The EITC is especially important to rural families throughout the United States. Among poor and near-poor families, those in rural areas are more likely to be working, and they are more likely to be working in low-wage jobs

Colnes, William P.

Kneebone, Elizabeth

UNH Scholars' Repository

Carseyi n s t i t u t eFact Sheet 8 fall 2007eitC is Vital for Working-Poor Families in  rural americaW i l l i a m  O ’ H a r e  a n d  e l i z a b e t H  K n e e b O n ein tax year 2004, tax filers claimed almost $40 billion through the earned income tax Credit (eitC), mak-ing the eitC one of the largest federal programs that provides cash supports to low-income working families in the united states. This Fact sheet examines rural/urban dif-ferences in the Federal eitC program.1The eitC, a refundable tax credit, acts as a wage supple-ment and work incentive for low-income workers. unlike many other means-tested support programs, the eitC does not require a separate bureaucracy to administer benefits because it works through the tax code. to claim the credit, individuals must work (have earned income) and file a tax return. The vast majority of eitC dollars go to working families with children who have earnings below $35,000 a year. The low administrative cost, built-in work incentive, and focus on families with children make the eitC appeal-ing to legislators across the political spectrum.The eitC is especially important to rural families throughout the united states. among poor and near-poor families, those in rural areas are more likely to be working, and they are more likely to be working in low-wage jobs. almost half (48 percent) of rural children live in low-income families (incomes less that twice the poverty line) compared with 37 percent of urban children.2 These factors contrib-ute to the higher rate of eitC receipt in rural areas across the country, and underline the importance of the benefit to these families. receipt of eitC in rural areas also has been boosted in recent years by programs designed to make sure all those families who are eligible get this benefit.3While only 16 percent of u.s. tax filers in 2004 were from rural areas, rural eitC filers claimed 20 percent of the 39.8 billion eitC dollars. rural eitC recipients collectively received $7.8 billion through the credit in 2004.The amount of money received by the average rural family ($1,850) may not seem like much to more affluent families, but for low-income families it can be an enormous help. For kids growing up in low-income families, even a small boost in income can lead to better child outcomes; a few thousand dollars a year can have significant impacts.4as Congress entertains legislation to expand the eitC program, it is important to recognize how vital this program is for low-income families in rural america. For a large seg-ment of rural families, and upwards of one-third of families in some states in the rural south, the eitC provides an important source of income that can supplement stagnant wages, help a family hold onto a home, repair a car to keep working, or cover health bills.Several key facts are clear:•	 Nationwide	a	higher	percentage	of	rural	tax	filers	(20	percent)	receives	the	EITC	than	urban	filers	(16	percent).	And	the	same	is	true	in	almost	every	state.	Rural	tax	filers	receive	the	EITC	at	a	higher	rate	than	urban	filers	in	42	of	48	states	(All	counties	in	New	Jersey	and	Rhode	Island	are	in	Metropolitan	Areas).	•	 The	rate	of	rural	EITC	receipt	varies	greatly	depending	on	the	state.	The	states	where	receipt	of	EITC	among	rural	families	is	the	highest	are	in	the	South	and	Southwest.	Mississippi,	Louisiana,	and	Georgia	each	had	more	than	30	percent	of	their	rural	tax	filers	receive	the	credit	in	2004.•	 States	in	the	South	and	Southwest	are	where	the	rural/urban	gap	in	the	percentage	of	fillers	receiving	EITC	is	largest.	Lead-ing	the	list,	rural	tax	filers	in	Georgia	and	Arizona	are	much	more	likely	to	receive	the	EITC	than	their	urban	counterparts.•	 At	the	national	level,	there	is	little	difference	in	the	average	amount	of	ETIC	received	--	$1,831	for	urban	families	compared	to	$1,850	for	rural	families.	But	there	are	substantial	differenc-es	across	the	rural	areas	of	states,	ranging	from	a	low	of	$1,232	in	Massachusetts	to	a	high	of	$2,193	in	Louisiana.•	 Most	of	the	states	where	rural	families	receive	a	relatively	high	level	of	EITCs	are	located	in	the	South:	Louisiana	($2,193),	Mississippi	($2,183),	Georgia,	($2,099),	Alabama	($2,083),	and	Texas	($2,048).	The	states	with	lower	average	credits	for	rural	families	are	almost	all	located	in	New	England:	Massachusetts,	Alaska,	Vermont,	New	Hampshire,	and	Connecticut.	a U t H O r SDr. William O’Hare is a rural Fellow at the Carsey institute. (bbohare@comcast.net)elizabeth Kneebone is a research analyst at the Brookings institution’s Metropolitan Policy Program. (eKneebone@brookings.edu)Huddleston Hall, 73 Main street, Durham, nH  03824(603) 862-2821 • www.carseyinstitute.unh.eduThe Carsey institute Reports on Rural America are supported by the  annie e. Casey Foundation’s initiative to strengthen rural families,  the Ford Foundation, and the W.K. Kellogg Foundation.Building Knowledge for Families and Communities in the 21st Centurye n d n O t e S1 “rural” refers to nonmetropolitan counties and “urban” refers to counties inside metropolitan areas, as classified by the u.s. Office of Management and Budget.2 u.s. Census Bureau, available online at www.census.gov/hhes/www/pov-erty/detailedpovtabs.htmltable 1. receipt of eitC in rural and Urban Households: tax Year 2004 RuRal (Outside Metropolitan areas)  uRban (Inside Metropolitan areas)         State Share Receiving EITC Amount Average EITC Share EITC Amount Average EITC  EITC ($ in millions) Amount EITC ($ in millions) Amount US 20.4% 7,835.2 $1,850 16.3% 31,926.9 $1,831 4.1%Alabama 29.2% 316.4 $2,083 24.6% 694.7 $2,109 4.6%Alaska 13.9% 22.9 $1,516 10.6% 37.0 $1,568 3.3%Arizona 25.9% 115.5 $1,936 16.2% 605.8 $1,817 9.7%Arkansas 28.4% 246.4 $1,977 22.6% 292.6 $1,937 5.9%California 15.7% 84.7 $1,602 16.3% 4,185.9 $1,801 -0.6%Colorado 15.5% 69.3 $1,629 12.3% 357.4 $1,648 3.2%Connecticut 9.6% 21.5 $1,565 10.2% 246.2 $1,627 -0.6%DC    18.0% 83.3 $1,741  NADelaware 17.4% 25.5 $1,825 13.9% 74.2 $1,750 3.5%Florida 21.9% 178.8 $1,860 19.7% 2,684.9 $1,839 2.2%Georgia 31.0% 434.3 $2,099 21.0% 1,270.9 $2,000 10.0%Hawaii 16.2% 42.0 $1,569 13.8% 95.3 $1,631 2.4%Idaho 18.8% 65.6 $1,746 16.4% 108.6 $1,747 2.4%Illinois 16.0% 201.5 $1,690 14.9% 1,344.2 $1,858 1.1%Indiana 15.3% 160.1 $1,688 15.2% 585.7 $1,775 0.1%Iowa 13.8% 132.1 $1,627 12.1% 142.2 $1,633 1.7%Kansas 17.1% 130.3 $1,747 13.0% 168.4 $1,709 4.1%Kentucky 24.1% 292.8 $1,804 16.8% 306.8 $1,751 7.3%Louisiana 32.6% 305.0 $2,193 27.7% 796.7 $2,149 4.9%Maine 16.5% 66.7 $1,623 12.2% 69.0 $1,563 4.3%Maryland 14.5% 33.8 $1,720 13.2% 549.8 $1,731 1.3%Massachusetts 8.4% 1.5 $1,232 10.2% 481.2 $1,590 -1.8%Michigan 15.3% 210.1 $1,673 14.3% 930.1 $1,809 1.1%Minnesota 13.6% 139.2 $1,604 9.8% 263.4 $1,563 3.8%Mississippi 36.3% 491.8 $2,183 27.7% 295.6 $2,088 8.6%Missouri 21.6% 246.2 $1,797 15.6% 524.4 $1,777 6.0%Montana 17.5% 81.5 $1,693 15.7% 38.6 $1,599 1.8%Nebraska 15.5% 89.6 $1,721 12.3% 95.0 $1,693 3.2%Nevada 13.9% 25.5 $1,689 15.2% 244.3 $1,710 -1.3%New Hampshire 11.3% 42.3 $1,564 8.8% 53.1 $1,528 2.5%New Jersey    12.0% 838.4 $1,743 NANew Mexico 29.2% 145.8 $1,893 21.8% 213.1 $1,812 7.4%New York 17.2% 195.7 $1,723 17.3% 2,402.5 $1,799 -0.1%North Carolina 24.7% 519.1 $1,935 18.6% 891.4 $1,862 6.0%North Dakota 14.9% 39.6 $1,670 10.9% 23.9 $1,553 4.0%Ohio 15.5% 270.2 $1,727 14.4% 1,110.6 $1,778 1.1%Oklahoma 24.3% 230.7 $1,887 20.0% 342.3 $1,853 4.3%Oregon 17.6% 102.6 $1,709 13.3% 259.8 $1,627 4.4%Pennsylvania 14.6% 207.6 $1,621 13.2% 1,076.4 $1,689 1.4%Rhode Island    13.2% 110.7 $1,721 NASouth Carolina 29.7% 251.2 $2,004 21.6% 563.1 $1,896 8.0%South Dakota 17.0% 55.3 $1,706 13.4% 35.6 $1,612 3.6%Tennessee 23.7% 284.2 $1,823 20.4% 727.1 $1,883 3.4%Texas 27.5% 641.6 $2,048 23.2% 3,807.2 $2,051 4.3%Utah 18.1% 34.3 $1,837 13.8% 207.5 $1,741 4.3%Vermont 13.7% 42.1 $1,517 10.1% 14.6 $1,448 3.6%Virginia 20.5% 162.0 $1,767 13.4% 695.4 $1,765 7.0%Washington  15.8% 87.7 $1,720 12.2% 496.2 $1,659 3.6%West Virginia 22.2% 120.5 $1,736 17.4% 125.1 $1,684 4.7%Wisconsin 12.2% 135.8 $1,575 11.0% 343.5 $1,665 1.1%Wyoming 13.5% 36.0 $1,615 14.7% 17.7 $1,644 -1.2%Source: Brookings Institution analysis of Internal Revenue Service data     Rural/urban Percentage-point Difference in Receiving EITC3 For example, see The annie e Casey Foundation, www.aecf.org/upload/PDFFiles/Fes/fes_eitc.pdf.4 Duncan, Greg J., Jeanne Brooks-Gunn, W. Jean yeung, and Judith r. smith, June 1998, “How Much Does Childhood Poverty affect the Life Chances of Children?” American Sociological Review, Vol. 63, (pp 406-423).

EITC is Vital for Working-Poor Families in Rural America

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