New Report Finds 2017 Tax Reform Exacerbated the Racial Wealth Divide
By Devin Simpson
A new report from the Institute on Taxation and Economic Policy and Prosperity Now found that the 2017 federal Tax Cuts and Jobs Act disproportionately benefits white households compared to households of color, further exacerbating the racial wealth divide.
The report, Race, Wealth and Taxes: How the Tax Cuts and Jobs Act Supercharges the Racial Wealth Divide, found that 72 percent of the tax cuts within the legislation have gone to the top 20 percent of earners, comprised mostly of white households. On average, white households receive $2,020 in tax cuts while Black households receive $840 and Latino households receive $970. The report also argued that households of color are likely to be penalized twice by the legislation: first by receiving less in tax cuts, and second by the higher national deficit being used to justify cuts to critical programs that aid low-income households.
Prosperity Now’s 2017 report, The Road to Zero Wealth, found that the racial wealth divide is a critical problem not just for households of color, but for the broader U.S. economy. Without significant policy changes, median Black household wealth will reach zero dollars by 2053, leading to disastrous consequences for the middle class as households of color become the majority in the coming decades.
Among the key recommendations in “The Road to Zero Wealth” was strengthening the Earned Income Tax Credit (EITC) to help alleviate the tax burden for households of color. Citing research from the Tax Policy Center finding that Black families disproportionately live in ZIP codes with high rates of poverty and EITC claims, the report suggested 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.”