The federal tax code is one of the most powerful tools that drives the economic outcomes that we seek. Unfortunately, instead of utilizing this “power tool” to help low and middle income earners build wealth, the newly enacted Tax Cut and Jobs Act (TCJA) exacerbates an already massive racial wealth divide by rewarding existing white wealth over the economic security of households of color, a disparity that reflects longstanding racial economic inequality in the United States. A new report from Prosperity Now and the Institution on Taxation and Economic Policy (ITEP) details the racial implications of TCJA.
Here are the THREE key findings from that analysis:
On average TCJA tax cuts benefit White earners of nearly all income statuses: “Of the $275 billion in tax cuts the TCJA provides to individuals this year, $218 billion (80%) goes to White households. On average, white households will receive $2,020 in cuts, while Latino households will receive $970 and Black households receive $840.”
TCJA tax cuts provide pronounced benefits for top earners who are overwhelmingly White: “Middle class households receive $2.75/day in tax cuts while White households in the top 1% receive $143/day; While 1.2% of White families earn enough to place them among the top 1 percent of earners, just 0.4% of Latino and Black families are members of this group.”
Communities of color, especially Asian households, stand to benefit the least: “Asian households fall in the bottom 20% of income-earning households, who receive just $70 from the Tax Cuts and Jobs Act in a year, or less than $0.20 per day.”
In enacting the Tax Cuts and Jobs Act, Congress has chosen to use this economic power tool to further buttress wealthy White households. Without change, TCJA tax cuts stand to increase the racial wealth divide and make it nearly impossible for households of color to catch up to White wealth.
Martine is a State Priorities Policy Fellow at the Budget and Tax Center, a Project of the North Carolina Justice Center. Her work focuses on economic equity and systems level policy change.