Juneteenth: Claiming Tax Credits as a Form of Economic Freedom

Lauren Bush

Juneteenth is a historic day that celebrates the emancipation of enslaved Black Americans following the end of the Civil War and marks the ongoing fight for equality and justice. In our celebrations, it’s essential to recognize the role of economic freedom in promoting widespread prosperity among various communities.

Addressing economic security is crucial in remedying the accumulated effects of years of institutional and systemic inequities that persist to this day. Among the many tools this country can employ to support Black Americans in achieving equality is to advance financial empowerment among low- and middle-income households through sustaining and expanding the Earned Income Tax Credit (EITC) at both the federal and state levels.  

Empowering Black Mothers

The National Tax Journal examined the positive impacts of the EITC on single mothers, a group that is disproportionately represented among Black households. The research found that the EITC significantly increased employment rates and earnings for single mothers, greatly contributing to upwards economic mobility. By supplementing wages, the EITC enables families to meet their basic needs, invest in education and skills training, and build a pathway to economic stability.

Statistics also reveal that in 2019, the EITC also gave a boost to approximately 9 million women of color. Notably, 21% of Black women received the EITC and women of color tend to receive a larger average EITC than their white counterparts, demonstrating the critical role played by this tax credit in alleviating economic burdens promoting financial stability, and improving well-being among single Black mothers and their families.

Narrowing the Racial Wealth Gap

To fully grasp the significance of the EITC for Black communities, it is essential to examine the data and statistics that highlight the racial disparities in income and poverty rates. The U.S. Census Bureau reports that the poverty rate for Black Americans was 19.5% in 2020, compared to 7.3% for white Americans. These statistics underscore the urgent need for targeted policies like the EITC to address the specific challenges faced by Black individuals and families.

Ultimately, the EITC plays a crucial role in addressing this disparity by providing targeted support to low-wage workers, who are more likely to be people of color. By boosting income for eligible individuals and families, the EITC helps bridge the disparity.

Solutioning Barriers to Access

In recent years, legislators have expanded the Child Tax Credit (CTC) substantially, notably through the 2017 Tax Cuts and Jobs Act, which doubled the maximum federal credit from $1,000 to $2,000, benefiting families across the income spectrum.

While higher-income taxpayers gained greater eligibility, the changes also provided modest, but significant, benefits for low-income households. The expansion increased the refundable portion to $1,400 and slightly adjusted the earnings phase-in threshold to $2,500. Tax credit refundability is crucial because it ensures that low-income families, who often have no federal income tax liability despite shouldering other tax burdens, can receive refunds that go beyond reducing their tax liability.

While the EITC is a valuable tool, certain challenges exist in accessing its benefits for low-income families, particularly in historically excluded communities. Some of these barriers include a lack of awareness, difficulties in navigating the complex tax system, and limited access to tax preparation resources. State governments also can play a vital role in addressing these challenges by implementing outreach programs, simplifying the state tax credits application process, and helping ensure that eligible Black families can easily access both the federal and state EITCs.

Continuing Progress
The EITC stands as a potent tool in the fight against economic inequality and racial disparities. As more and more states enact their own EITCs to supplement the federal EITC, it is crucial to continue advocating for its expansion and accessibility to ensure its benefits reach those who need it most. As we celebrate Juneteenth, it is not only as a commemoration of freedom, but also as a reminder of the work ahead in achieving economic justice and equality for Black communities. Harnessing the potential of the EITC and CTC can be a strong step forward in advancing the cause.