Racial Justice Requires Tax Justice: Our Analysis Helps Deliver Both

In 2018 and 2019, a deeply committed group of staff at the Institute on Taxation and Economic Policy responded to calls from racial justice activists and researchers to develop a better understanding of the deep and damning interconnection between tax policy and racial inequity. In doing so, our team built on work academics like Beverly I. Moran and William Whitford had raised more than 20 years earlier, scholars (notably Dorothy Brown, Robin Einhorn, Camille Walsh, Vanessa Williamson, and Darrick Hamilton) had raised since, and allies at Institute for Policy Studies, Center on Budget and Policy Priorities, and other places had also explored. We’ve been happy more recently to see the federal government and other research organizations tackling this too and my colleague Brakeyshia Samms recently discussed why this feels so crucial to many on our staff.

ITEP’s analytical approach, our comprehensive microsimulation model, and our unique state-level capacities enable us to do pioneering analyses that no other entity can do in the same way. We describe our methodology, refined in 2020, here. Some distinctive ways our work enriches the debate on racial justice in tax policy include:

• ITEP is uniquely able to analyze economic, racial, and ethnic distribution of tax policies and proposals at the state level. In 2021, we used this data to explain best practices for racially equitable state income taxes which include creating graduated rates, taxing income from investments at the same rate as income from work, and taxing pass-through business income, among other reforms. Another comprehensive 2021 ITEP report discussed how other aspects of state tax codes contribute to or detract from equity, finding that reliance on fines, fees, and sales taxes increases inequity, while concentrating on income taxes, corporate taxes, and estate and inheritance taxes improves racial equity.
• ITEP can uniquely discuss state-level racial and ethnic distribution of federal policies and proposals as we did in this piece on eliminating the cap on state and local tax deductions. We also document how federal policy affects Americans nationwide by race and ethnicity, as in this piece on the Inflation Reduction Act, this analysis of the Tax Cuts and Jobs Act, or this piece on two different 2022 approaches to expanding the Child Tax Credit.
• For decades, we’ve analyzed state-level economic distribution of tax policies and proposals, in addition to our newer ability to analyze racial and ethnic distribution. Our multi-state analytical capacity is unique. This recent report on flat taxes is a good example of how our tools steer policymakers and advocates toward more economically just tax proposals.
• Because of ITEP’s deep partnership with state-level analysts across the country, our work is disseminated by partners, enabling our small state team to punch way above its weight. Readers can find a constantly updated list of ways that state partners use our analyses in this section of our website. Some examples include these releases from the North Carolina Budget and Tax Center, the Arizona Center for Economic Progress, and the Louisiana Budget Center, to cite just a few.
• ITEP uses data from the American Community Survey to impute race and ethnicity information onto our tax model universe. We aim to capture as complete a range of race and ethnicity categories as possible so journalists, policymakers, and voters can better understand how taxes and equity intersect. Our model provides insight on how tax policies affect Hispanic and non-Hispanic taxpayers who are white; Black; Asian; American Indian, Alaska Native; Native Hawaiian and other Pacific Islander; multiple race; and other single race. We know these Census categories don’t reflect all of our country’s complex racial and ethnic identities and we’ll add to the richness of our race and ethnicity analyses as data improve.
• Finally and crucially, our work directly helps people of all races in all states pushing for equitable, adequate taxes. That’s why our analysis was so crucial to helping Massachusetts citizens vote for the Fair Share Amendment which equitably raises revenue for education and transportation. It’s why our help to Mississippi researchers enabled them to successfully fight off income tax elimination last year, which would have dealt a blow to equity. And it’s why the Washington State Supreme Court cited ITEP findings in the March 2023 ruling that their capital gains tax was constitutional.

We continually refine and augment our methodology. In addition to having unique data and analyses, ITEP publishes pathbreaking reports that expand the literature on racially equitable tax policy. Some examples include research on how:

• Special rules for capital gains and undertaxation of investment income increase racial inequality, by Joe Hughes and Emma Sifre.
• We can create more racially equitable tax codes in Southern states, by Kamolika Das.
• Reliance on fines and fees exacerbates racial inequity, by Jenice Robinson, research that helped inspire us to launch Reimagining Local Taxes, a new project led by Kamolika Das.
• Expanding the child tax credit would shrink the racial wealth gap, by Brakeyshia Samms and Joe Hughes.
• Better focus on race at the Department of Treasury enriches the debate, by Emma Sifre.
• Build Back Better tax proposals would advance racial equity by Brakeyshia Samms, building on this comprehensive report with state-by-state data by Aidan Davis.
• The qualified business income deduction hurts racial equity, by Marco Guzman.

At ITEP, we know America won’t get racial or economic justice until we get tax justice. That’s why we built our microsimulation model in the 1990s to help policymakers, journalists and citizens understand who pays more and less of their income in taxes. It’s why we constantly improve that model. And it’s why we get up every day to fight for a country where the wealthiest people and corporations pay their fair share and people from every background can thrive.

Current and former ITEP staff had the vision to add racial and ethnic capacity to our microsimulation model and to publish initial and ongoing analyses. We are particularly indebted to current ITEP leaders Carl Davis, Erika Frankel, Emma Sifre, Kamolika Das, Aidan Davis, Marco Guzman, Joe Hughes, Galen Hendricks, Matthew Salomon, and Brakeyshia Samms and to former ITEP leaders including Meg Wiehe, Richard Phillips, Jessica Schieder, Misha Hill, Jenice Robinson, and Lorena Roque for advancing our work in this area. 

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