By Devin Simpson
Expanding the Earned Income Tax Credit (EITC) is a key part of a broader policy agenda to address the racial wealth divide, according to a new report from Prosperity Now (formally CFED) and the Institute for Policy Studies.
The Road to Zero Wealth: How the Racial Wealth Divide Is Hollowing Out America’s Middle Class finds that if the racial wealth divide is not addressed, median black household wealth will reach zero dollars by 2053. The report also finds that this decline in wealth for households of color will have disastrous consequences on the middle class and the larger economy as households of color become a majority of the population in the coming decades.
The report highlights a range of policies that could help close the racial wealth divide by improving access to life-long wealth building opportunities, increasing incomes and encouraging savings.
Among the key recommendations is strengthening the EITC and raising the minimum wage to generate more income for households of color. Specifically, the report suggests expanding the EITC for workers without dependent children, simplifying the process of filing for the credit, and allowing recipients to save a portion of their EITC for a “rainy day” later in the year.
“Given the important role the EITC plays as the country’s largest and most effective anti-poverty program, it is critical that we expand, improve and simplify the credit,” note the report authors.
Other polices recommended by the authors include revamping the federal tax code to benefit low-income households, investing in new programs such as Children’s Savings Accounts and strengthening the Consumer Financial Protection Bureau to protect struggling families from predatory wealth-stripping practices.