Rescue Plan’s Expansions of Earned Income Tax Credit, Child Tax Credit Will Benefit Rural Residents

Rural communities — both nationally and in most states — will benefit disproportionately from the American Rescue Plan’s temporary expansions of the Earned Income Tax Credit (EITC) and Child Tax Credit. However, the expansions will expire after this year if Congress does not extend them.

The EITC and Child Tax Credit are powerful anti-poverty tools, especially in rural (non-metro) communities, but prior to the Rescue Plan they had two major flaws. The EITC for workers not raising children in the home was extremely small; as a result, 5.8 million workers aged 19-65 without children (excluding full-time students under 24) were taxed into or deeper into poverty. And 27 million children — including roughly half of Black and Latino children and nearly half of children living in rural areas — received less than the full $2,000-per-child Child Tax Credit because their parents earned too little, even as middle- and higher-income families received the full amount.

The American Rescue Plan addressed both of these flaws on a temporary basis. For tax year 2021, it raised the maximum EITC for workers without children from roughly $540 to roughly $1,500 and raised the income cap to qualify from about $16,000 to about $21,000. It also expanded the age range of eligible workers without children to include younger adults aged 19-24 (excluding those under 24 attending school at least part time), as well as people aged 65 and over. The Plan also made the full Child Tax Credit available to children in families with low earnings or who lack earnings in a given year and increased the maximum credit to $3,000 per child ($3,600 for children under 6). It also extended the credit to 17-year-olds. The increase in the maximum credit begins to phase out once incomes exceed $112,500 for heads of households and $150,000 for married couples.

Twenty-one percent of workers without children who live in rural areas will benefit from the Rescue Plan’s EITC expansion, compared to 17 percent of those in metro areas. (See Table 1.) And 94 percent of children who live in rural areas will benefit from its Child Tax Credit expansion, compared to 89 percent of those in metro areas. (See Table 2.) These expansions are critical to households in both rural and metro areas and should be made permanent.

TABLE 1
Workers Without Children Benefiting From EITC Expansion in American Rescue Plan
  Workers without children in rural areas benefiting Of workers without children living in rural areas, percent benefiting Of workers without children living in metro areas, percent benefiting
National (42-state) total* 2,653,000 21% 17%
Alabama 62,000 22% 21%
Alaska 15,000 17% 14%
Arizona 19,000 26% 19%
Arkansas 71,000 25% 20%
California 57,000 23% 17%
Colorado 42,000 17% 15%
Connecticut 8,000 11% 14%
Florida 48,000 25% 20%
Georgia 102,000 23% 18%
Hawai’i 16,000 18% 14%
Idaho 37,000 23% 20%
Illinois 84,000 20% 15%
Indiana 80,000 18% 18%
Iowa 72,000 17% 16%
Kansas 59,000 20% 17%
Kentucky 108,000 25% 19%
Louisiana 48,000 27% 21%
Maine 38,000 21% 16%
Michigan 117,000 23% 18%
Minnesota 70,000 17% 14%
Mississippi 85,000 23% 22%
Missouri 98,000 23% 17%
Montana 50,000 21% 22%
Nebraska 38,000 17% 16%
Nevada 16,000 19% 18%
New Hampshire 29,000 16% 12%
New Mexico 44,000 26% 22%
New York 79,000 19% 15%
North Carolina 139,000 23% 18%
Ohio 134,000 19% 18%
Oklahoma 75,000 23% 20%
Oregon 41,000 22% 18%
Pennsylvania 88,000 20% 16%
South Carolina 47,000 24% 20%
Tennessee 89,000 23% 18%
Texas 178,000 23% 18%
Utah 15,000 20% 17%
Vermont 25,000 17% 15%
Virginia 64,000 21% 14%
Washington 44,000 21% 14%
West Virginia 39,000 23% 20%
Wisconsin 86,000 17% 15%

* Estimates exclude Delaware, the District of Columbia, New Jersey, and Rhode Island because they consist entirely of metropolitan areas, and Massachusetts, Maryland, North Dakota, South Dakota, and Wyoming due to lack of reliable data on metro/non-metro residence. If the eight missing states and D.C. were included, the national total for metro and non-metro areas combined would be roughly 17.4 million workers without children. Workers without children are defined in this table as adults aged 19 and older (excluding students under age 24 attending school at least part time) who worked at least one week of the year.

Source: CBPP estimates based on U.S. Census Bureau’s 2016-2018 American Community Survey (ACS) and March 2019 Current Population Survey (CPS), using 2021 tax parameters and incomes adjusted for inflation to 2021 dollars. We started with a CPS-based estimate of workers without children who will benefit and allocated it to states and metro/non-metro areas using the ACS (column 2); to calculate the percentages in columns 3 and 4, we calculated national numerators and denominators using the CPS and allocated each by state using the ACS. For each of 982 local geographic areas identified in the Census files, we used data from the Missouri Census Data Center on whether the area was metropolitan, non-metropolitan, or a mix; and, if mixed, what share of the population was non-metro under the Office of Management and Budget’s 2015 area definitions.

TABLE 2
Children Under 18 Benefiting From Child Tax Credit Expansion in American Rescue Plan
  Children in rural areas benefiting Of children living in rural areas, percent benefiting Of children living in metro areas, percent benefiting
National (42-state) total* 9,315,000 94% 89%
Alabama 247,000 95% 92%
Alaska 59,000 92% 88%
Arizona 85,000 97% 92%
Arkansas 248,000 95% 92%
California 153,000 93% 86%
Colorado 136,000 93% 87%
Connecticut 28,000 84% 81%
Florida 138,000 94% 91%
Georgia 388,000 95% 89%
Hawai’i 55,000 93% 90%
Idaho 139,000 94% 92%
Illinois 293,000 93% 87%
Indiana 323,000 94% 91%
Iowa 272,000 93% 90%
Kansas 213,000 95% 90%
Kentucky 386,000 94% 90%
Louisiana 176,000 94% 92%
Maine 94,000 92% 89%
Michigan 341,000 93% 90%
Minnesota 264,000 92% 85%
Mississippi 362,000 95% 94%
Missouri 333,000 95% 89%
Montana 136,000 92% 91%
Nebraska 150,000 94% 90%
Nevada 55,000 95% 92%
New Hampshire 80,000 89% 83%
New Mexico 159,000 95% 93%
New York 253,000 93% 85%
North Carolina 451,000 94% 89%
Ohio 501,000 94% 90%
Oklahoma 291,000 95% 92%
Oregon 134,000 94% 88%
Pennsylvania 270,000 94% 88%
South Carolina 157,000 96% 92%
Tennessee 311,000 95% 91%
Texas 709,000 95% 90%
Utah 91,000 94% 92%
Vermont 68,000 90% 88%
Virginia 198,000 94% 83%
Washington 145,000 94% 86%
West Virginia 134,000 94% 92%
Wisconsin 291,000 93% 89%

* Estimates exclude Delaware, the District of Columbia, New Jersey, and Rhode Island because they consist entirely of metropolitan areas, and Massachusetts, Maryland, North Dakota, South Dakota, and Wyoming due to lack of reliable data on metro/non-metro residence. If the eight missing states and D.C. were included, the national total for metro and non-metro areas combined would be roughly 65.6 million children.

Source: CBPP estimates based on U.S. Census Bureau’s 2016-2018 American Community Survey (ACS) and March 2019 Current Population Survey (CPS), using 2021 tax parameters and incomes adjusted for inflation to 2021 dollars. We started with a CPS-based estimate of children benefiting and allocated it to states and metro/non-metro areas using the ACS (column 2); to calculate the percentages in columns 3 and 4, we calculated national numerators and denominators using the CPS and allocated each by state using the ACS. For each of 982 local geographic areas identified in the Census files, we used data from the Missouri Census Data Center on whether the area was metropolitan, non-metropolitan, or a mix; and, if mixed, what share of the population was non-metro under the Office of Management and Budget’s 2015 area definitions.