Rewarding Work Through the Tax Code: The Power and Potential of the Earned Income Tax Credit in 27 Cities and Rural Areas

Findings

A study of the year 2000 spatial distribution of the federal Earned Income Tax Credit (EITC) in 27 places participating in the National Tax Assistance for Working Families Campaign finds that:

• Across the 27 urban and rural campaign sites, 2 million families obtained more than $3.4 billion in EITC refunds in 2000. The credit boosted the incomes of working families in these places by an average of $1,700, or 13 percent.
  
  
• More than one out of five tax filers in the campaign sites benefited from the EITC. The share of filers earning the credit ranged from 7.7 percent in Seattle to 52 percent in Camden, N.J.
  
  
• State-level income tax credits that build on the federal EITC boosted family incomes in 12 of the sites by a combined $312 million in 2000. Creating refundable EITCs at the state level in the 18 sites where no such credit exists could supplement the earnings of working families in these places by an additional $270 million.
  
  
• Low-income filers in the 27 sites spent an estimated $212 million in EITC refunds on tax preparation and high-cost loans in 1999. In several campaign sites, including Atlanta, Baltimore, Indianapolis, New Orleans, and rural Georgia, more than half of all EITC earners claimed their refunds through a high-cost loan.