Changes in Child Tax Credit Have Bigger Impact on Rural Families
Children living in rural counties are more likely than metropolitan children to benefit from this year’s expansion of the child tax credit.
An analysis of Census data shows that about 49% of rural children were likely to have received increased child tax credits because of changes affecting low-income families. In metropolitan areas, about 39% of children were likely to have benefited from those changes.
Those provisions are set to expire at the end of the year unless they are included in the infrastructure plan currently before Congress.
The child tax credit was expanded as part of the American Recovery Act, which went into effect in March. Under the changes, the maximum per-child credit rose from $2,000 per child to $3,600 for children under 6 and $3,000 for children 6 and up. The credit was also expanded to include to 17-year-olds for the first time.
While all but the wealthiest families benefitted from these increases, other changes in the tax credit focused on improving prospects for low-income families. These changes helped rural children disproportionately, according to an analysis of household income based on Census data.
Under the old rules, the tax credit did not phase in until a household’s annual earnings surpassed $2,500. To receive the full credit for one child, households had to earn about $12,000 or more. The tax credit for a second child did not fully phase in until a household earned about $21,000.
To approximate the impact of the change, we looked at the number of children in each county who live at or below 200% of the federal poverty level, according to the 2015-19 American Community Survey. The Center on Budget and Policy Priorities estimates that children below that threshold were more likely to have received only partial or no tax credit under the old income rules.
The expansion of the child tax credit is temporary. A version of the stimulus package currently before Congress would make the income-requirements changes permanent. The measure would also to extend the increased per-child payment through 2025. A key vote is expected on the infrastructure package Thursday, September 30.
The Center for Budget Policy and Priority estimates that the changes would reduce the number of children living below the poverty line by 40%.
We also looked at how the income-requirement changes in the child tax credit may have affected different types of counties around the U.S., based on the size of metropolitan areas. Children in nonmetropolitan counties (which is how we are defining rural for this analysis) were the most likely to benefit. Children living in the central counties of major and medium-sized metropolitan were more likely than suburban kids to benefit. Children in small metro areas were also more likely than suburban kids to benefit from the change.