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 more than $21,000 for unmarried filers and from about $22,000 to more than $27,000 for married couples. 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.