Monday, March 28, 2011

The EITC and the Suburban Working Poor

The Earned Income Tax Credit is a federal tax credit for low- and moderate-income working people designed to encourage and reward work as well as offset payroll and income taxes. EITC has been successful by most accounts in its response to economic trends by offering critical support to help working families during times of economic hardship as well as to the shift in geography of the working poor (increasingly suburban). A report by the Brookings Institution, Responding to the New Geography of Poverty: Metropolitan Trends in the Earned Income Tax Credit, assesses the changing geographic distribution of the low-income population compared to recipients of the federal Earned Income Tax Credit (EITC) between 1999 and 2007 in the nation’s 100 largest metro areas. The report finds that:
  • Changes in EITC receipt have tracked closely with the growing and shifting geography of working poverty.
  • Between 1999 and 2007, all 69 large metro areas that experienced significant growth rates in their low-income populations saw EITC receipt increase in response.
  • Low-income workers claimed $47.5 billion through the EITC in 2007—a real increase of 25 percent over 1999—with 60 percent of EITC dollars going to residents of the 100 largest metro areas.
The continuing growth of poor working families in the suburbs is an important aspect of this report. It highlights the importance of EITC for low-income workers and families because of it’s ability to respond to families in suburban and rural communities. Low-income suburban residents living in communities without place-based opportunities are able to benefit from the EITC because it is delivered through the tax code, and therefore highly accessible.
Click here to learn about state strategies for enacting and expanding a state EITC. Click here for strategies to expand state EITC outreach