EITC Receipt Rises in the South

The proportion of tax filers claiming the federal Earned Income Tax Credit (EITC) is higher in the South than in any other part of the country. Moreover, Southern metropolitan areas posted the nation's most rapid increases in EITC receipt between 2000 and 2003. These findings come from a new analysis of the federal EITC published by the Brookings Institution.

A feature of the federal tax code, the EITC is a refundable tax credit and wage subsidy generally targeted to low-income working families (those with incomes below $35,000). First enacted during the 1970s and expanded significantly during the 1990s, the EITC has become America's most effective anti-poverty program.

Perhaps the report's most alarming finding pertains to recent trends. Between 2000 and 2003, both the absolute number and proportion of taxpayers receiving the EITC rose. In 2003, 16.9 percent of all tax filers in the U.S. received the EITC, up from 14.9 percent in 2000. The Brookings study finds that this increase was attributable primarily to worsening economic conditions that made more families eligible for the EITC.

Southern metropolitan areas contain large concentrations of EITC recipients. In New Orleans, for instance, 38.5 percent of taxpayers received the EITC in 2003 -- the highest proportion in the nation. Similarly, six of the 10 American cities with the highest proportion of taxpayers receiving the EITC were Southern.

The Brookings' report outline changes that could be made on the federal level to strengthen the EITC. However, policy options also are available to state leaders across the South. First, Southern leaders can support outreach efforts designed to help qualified taxpayers claim the federal EITC. One such initiative is the EITC Carolinas program run by MDC, Inc. in Chapel Hill. Second, Southern legislators can help reward work by implementing state-level EITC programs linked to the federal one. In 2006, Virginia will become the first Southern state to add an EITC to its tax code.