The Brookings Institution has issued a new report, “A Local Ladder for Low-Income Workers: Recent Trends in the Earned Income Tax Credit.”Prepared by research analyst Elizabeth Kneebone, the report contains an analysis of Internal Revenue Service data on low-income working families who received the federal EITC for the 2000 and 2004 tax years. Among the report’s findings:

  • In the 2004 tax year, more than one in six taxpayers nationwide received the EITC. Cities in the south, such as Jackson, Miss. (41 percent), and El Paso, Texas (37 percent), had among the highest rates of EITC receipt in the country.
  • By 2004, large metropolitan suburbs were home to 2.4 million more EITC recipients than their cities.
  • More than 46 percent of EITC filers claimed the additional child tax credit in tax year 2004, and together the EITC and ACTC accounted for more than 70 percent of refunds paid to those low-income working families.
  • The proportion of EITC recipients who filed their returns through volunteer tax preparers increased steadily in recent years, but by 2004 remained far lower (under 2 percent) than the share using paid preparers (over 70 percent).

The paper also pointed to a particular trio of findings, suggesting that they be further studied and considered for policy changes:

  • The large number of EITC filers living in the suburbs of metropolitan areas reflects the continued suburbanization of working poverty and low-wage employment across the country;
  • The refundable portion of the child tax credit has emerged as an important additional support for low-income working families, with almost half of EITC filers collectively claiming an additional $9 billion dollars through the ACTC in tax year 2004, suggesting that the credit is worthy of further educational outreach; and,
  • A growing, but still small, share of EITC recipients are accessing volunteer programs to file their tax returns, although relatively few suburban EITC recipients use those services.

The full report is available online, at www.brookings.edu/metro/pubs/200704eitc.pdf.

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