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Small Town Minnesota and the Earned Income Tax Credit

PHOTO: A new analysis on the Earned Income Tax Credit shows it's even more significant in small towns and rural areas. Photo credit: Lending Memo/Flickr.
PHOTO: A new analysis on the Earned Income Tax Credit shows it's even more significant in small towns and rural areas. Photo credit: Lending Memo/Flickr.
November 11, 2014

ST. PAUL, Minn. - A new study shows a tax credit helping many low-income working families keep more of their earnings is proving to be especially important in rural areas and small towns across Iowa and the country.

Jon Bailey, rural public policy director at the Center for Rural Affairs, is the author of the just-released Earned Income Tax Credit and Rural Households study. He says the Earned Income Tax Credit (EITC) is one of the most effective anti-poverty policy efforts the nation has produced.

"The Earned Income Tax Credit was used by more people in rural and small towns, and small city areas than in big urban areas in the country," he says.

Bailey adds the increased use of the tax credit tracks right along with the other economic indicators that point to many rural families still struggling financially.

Nationwide, the number of those who claim the credit is less than 19 percent in metropolitan areas, versus more than 21 percent in rural areas, small towns and small cities. Bailey predicts that divide will continue to widen.

"The gap between rural areas and urban areas has been growing," he says. "So if that trend continues, I would suspect more people are going to need to use the Earned Income Tax Credit. It's going to be even more important."

Bailey says the increasing importance of the EITC to working families should send a message to federal policy makers to strongly consider proposals to expand its reach, making more people eligible.

John Michaelson, Public News Service - MN