Smart Tax Policy Needed to Address the Racial Wealth Gap

Despite nearly a decade of economic recovery, income inequality has only worsened since The Great Recession, particularly for black and Latino workers. While many safety net programs aim to address the racial wealth gap,  our federal tax code continues to exacerbate the problem.

More progressive tax policy, including a stronger Earned Income Tax Credit (EITC), can help close the divide.

Last week, the Corporation for Enterprise Development (CFED) joined the National Council of La Raza (NCLR) to host a webinar on how the tax code is contributing to and could fix the racial wealth gap. The webinar explored how, historically, many wealth-building policies have excluded black and Latino households, and how the “upside-down” aspects of the tax code primarily benefit the wealthy while doing very little for low-income workers of color.

To better address the growing racial wealth divide, the webinar’s presenters recommended that policymakers focus on advancing “right-side up” tax policies, such as the EITC and Child Tax Credit (CTC). Specifically, policymakers could:

  • Expand the EITC for “childless workers,” or those without dependent children. This idea, which already has bipartisan support, would help more than 7.5 million workers – including 1.7 million Latinos — keep more of what they’ve earned.
  • Lower the age of eligibility for the EITC. Despite working and paying taxes, many people of color are excluded from the EITC’s benefits because they are too young. Lowering the eligibility threshold from 25 to 21 would allow many more workers to begin saving for the future earlier in life.
  • Defend the CTC against proposals that would limit eligibility to individuals with a Social Security number. These proposals would bar those who use an Individual Taxpayer Identification Number (ITIN) to pay taxes from benefiting from the CTC, many of whom are Latino families with children.

For more information about tax policy and the racial wealth divide, view the full webinar here: