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.
|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%|
|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%|