Why Red-State Voters Should Cheer Obama’s Tax-Break Veto Threat

There is a very specific reason why red-state voters should be rallying behind President Obama’s veto threat last week against legislation that would make permanent a host of business tax breaks but would not do the same for tax breaks for workers.

It turns out, according to a report by the Center for Rural Affairs, that the major tax break that was about to be left off the “make permanent” list – the Earned Income Tax Credit – disproportionately benefits rural families, particularly those in deep red states.

“The EITC has become a major source of income support for low-income rural taxpayers, particularly in the South,” says the report, which is based on an analysis of 2012 tax returns, cross-referenced with U.S. Census Bureau information on whether a tax return was filed from an urban or rural area.

On average, 21.5 percent of the people living in a small city, town or rural area claimed the EITC, nearly three percentage points higher than the percentage of people claiming the credit in metropolitan areas, the report said.

While far more people who claim the EITC live in cities, it turns out that the tax credit may well make a bigger difference to the economies of rural (and Republican-voting) districts. A joint study by the Brookings and Carsey institutes calculated that the EITC directly boosted rural economies by $10.5 billion in 2010.

According to the Center for Rural Affairs report, the states with the largest rates of federal EITC returns from rural and “micropolitan” or small-town areas included Mississippi, Georgia, Arizona, Florida, South Carolina, Louisiana and Alabama.

The Earned Income Tax Credit, along with the Child Tax Credit and a college-tuition tax credit, would have been allowed to expire in 2017 under a deal what was being hammered out in the Senate. In the meantime, a set of 10 tax benefits, most of which would benefit corporations, would have been made permanent. It’s all part of a package of what’s known as “tax extenders” – breaks that lobbyists managed to get Congress to insert into the tax code and are now pushing to get extended past their expiration date.

Progressives are leading the effort to call this out as a bad deal for working people, and are applauding President Obama for insisting that, at the very least, we should not be rubber-stamping permanent tax breaks for corporations and the wealthy while keeping tax breaks for working people on what is at beast a hand-to-mouth existence. But it turns out that the people with the biggest stake in the fight live in the congressional districts where President Obama and Democrats are deeply unpopular – and may not be fully aware of how the right-wing politicians they have elected to office are failing them.


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