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Abstract

This paper examines utilization rates of Minnesota's earned income tax credit program by households on welfare from 1992 through 1999. We examine urban and rural differences in the rate of filing an income tax return and receiving the earned income tax credit. Tabulations show that urban areas have the lowest utilization rates, but are catching up in both income tax filing rates and earned income credit receipt rates. Regression analyses identify correlates to urban-rural differences. A modeling exercise examines how urban and rural households might respond to a 10 percent increase in the credit. Finally, policy suggestions are offered, which are relevant to urban and rural areas and are appropriate for other states.

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