Wednesday, June 16, 2010

Rural families stand to lose more from expiration of more generous child tax credit

If amendments to the child tax credit authorized by the economic stimulus package are not made permanent over three million low-income rural face stark drops in tax credit their families receive, says a new report from the Center on Budget and Policy Priorities in conjunction with the Carsey Institute at the University of New Hampshire. "Rural children will be over 20 percent more likely than children in urban and suburban areas to be affected — because their families are more likely to have modest incomes," researchers Arloc Sherman and Marybeth Mattingly report.

Prior to the stimulus, a family's first $12,550 in wages did not count toward the child credit, but the stimulus lowered that threshold to $3,000 for 2009 and 2010. President Obama has proposed making the change permanent, but if it is not, more than 10,000 rural children in each of the 44 states with reliable data studied would face reductions in the credit with over 100,000 children being affected in 11 states, Sherman and Mattingly write. The change extended the tax credit to an estimated 2.7 million low income families and increased the amount of the credit to low-income families who previously only received a partial credit.

If the change is allowed to expire, and the $12,550 threshold returns, a family will not be eligible for a full credit unless its earnings are at least $26,183. "The Urban Institute-Brookings Institution Tax Policy Center estimates that more than 18 million children aged 0-16 whose parents work will lose all or part of their child credit if Congress lets the improvement expire," the researchers write. Rural America is home to 15 percent of all U.S. children but 18 percent of children who would face a credit reduction if the change expires. (Read more)

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