Bridging the Gap: Refundable Tax Credits in Metropolitan and Rural America

Elizabeth Kneebone
Elizabeth Kneebone
Elizabeth Kneebone Former Nonresident Senior Fellow

April 14, 2008

This report examines the changing geographic distribution of recipients of the federal Earned Income Tax Credit (EITC) across large cities and suburbs, smaller metro areas, and rural communities in the United States. An analysis of IRS data on EITC recipients in tax years 2000 and 2005 reveals that:

  • In tax year 2005, the greatest number of EITC filers lived in the suburbs of large metropolitan areas. More than 8 million EITC filers lived in the suburbs, though big-city and rural taxpayers were more likely to receive the EITC. In both large cities and rural areas, more than one in five low-income workers claimed the credit in tax year 2005.
  • In the South and West, rural taxpayers were most likely to receive the EITC, while Northeastern and Midwestern EITC recipients were more concentrated in large cities. Over a quarter of rural taxpayers in the South claimed the EITC in tax year 2005. Similar, though slightly smaller, proportions of low-income workers in Northeastern central cities received the credit that year.
  • Total EITC filers increased by 3.2 million between tax years 2000 and 2005, and almost half that growth (1.6 million) occurred in large suburbs. While large suburbs captured much of the increase in actual EITC filers, rural areas—especially in the Midwest—experienced faster growth in the share of taxpayers claiming the EITC over the first half of the decade.
  • Almost 47 percent of EITC filers claimed the Additional Child Tax Credit (ACTC) in tax year 2005, for a total of $9.4 billion. EITC filers living in large suburbs were the most likely to also benefit from the ACTC, followed by EITC recipients in smaller metropolitan areas.

Together, the EITC and ACTC provided more than $51 billion to low-income workers in tax year 2005, acting as critical wage supplements for working poor families throughout the country. Proposals to expand and streamline these credits to help more working families across all types of communities—urban, suburban, and rural—deserve consideration from policymakers, practitioners, and researchers.