A study finds a federal tax credit that targets low-income working families is especially important in rural areas of Iowa and nationwide.
Jon Bailey, at the Center for Rural Affairs, says the Earned Income Tax Credit is focused on putting more money in the pockets of people who have jobs and who make less than around $50,000 a year.
“This is another anti-poverty, poverty alleviation program that more people in smaller areas, rural and small town areas, take advantage of,” Bailey says.
The gap between rural areas and urban areas is growing, he says, so more people will be needing to use the Earned Income Tax Credit when they do their federal taxes.
“This is something that is always something somebody should look at when they’re doing their federal taxes or have whoever does their taxes look at to see if they qualify,” Bailey says, “It’s been proven to be a very effective program for low-income taxpayers.”
The center’s study finds the higher use of the tax credit tracks alongside other economic indicators which show many rural families are still struggling financially.
“It has not only the effect of alleviating poverty for a lot of people,” Bailey says, “but it also acts as an economic stimulus so people go out and spend that money which then has the multiplier effect throughout the economy.”
The center’s report found the number of people who claim the credit is less than 19-percent in metropolitan areas versus more than 21% in rural areas and small towns.
Bailey says the increasing importance of the credit to working families should send a message to federal policy makers to consider expanding its reach, making more people eligible.
The Center for Rural Affairs is based in Lyons, Nebraska.