State Tax Policy Should Adopt the Principles of ‘Black Women Best’

With most elections over, state lawmakers are preparing for 2025 legislative sessions, and this means a new slate of tax policy proposals is on the horizon. This class of elected officials is in a tough position because of the decisions of their predecessors. Years of drastic tax cuts mean states have fewer dollars to fund new projects or invest in existing services, like education, transportation, and healthcare. This will make it more difficult to maintain programs that benefit everyone.  

However, there is an approach legislators can use to lift those left behind in the economy who bear the brunt of these harmful tax cuts. The Black Women Best framework provides legislators a novel way to pinpoint the devastating harms of some tax proposals so they can instead propose sensible solutions to today’s economic problems.  

Coined by economist Janelle Jones, Black Women Best is an analytical framework to explain the economy. It suggests if Black women, who have been one of the most economically exploited groups in the nation’s history, are having economic success then the economy is thriving. Black women are overrepresented in low-income and low-wealth families and face high levels of labor discrimination. Centering the economic wellbeing of Black women lifts all households that face these same problems.  

As Whitney Tucker of the Center on Budget and Policy Priorities noted in a report earlier this year, the Black Women Best framework can be applied to state tax policy in many ways. Here are two key policies that lawmakers should prioritize in 2025. 

Improve Taxation of Income from Wealth  

For centuries, economic policies have advantaged white men in employment, financial security, and wealth accumulation. Black women are disproportionately represented in low-wealth households and have less access to wealth-building opportunities. Yet the federal tax code taxes income from wealth (capital gains income) at a lower rate than income from work (wages), widening economic and racial wealth divides and constraining revenue for public needs.   

State tax codes can help compensate for this flaw in federal policy, while reducing racial wealth divides and raising revenue to invest in public programs by taxing capital gains at a higher rate than income from work. This would lessen the racial and economic equity of regressive state and local tax systems.  

In 2023, Minnesota became the first state with a broad-based income tax to tax long-term capital gains income at a higher rate than wages. This 1 percent tax on high-income earners’ investment income is an important small step toward counteracting the way the federal system taxes wealth at preferential rates.  

This year New Mexico placed additional limitations on the state’s capital gains deduction, in a move expected to raise more than $60 million a year. Taxpayers used to be able to deduct the greater of $1,000 or 40 percent of a taxpayer’s income from capital gains. That limit was raised to the greater of $2,500 or 40 percent of up to $1 million of their capital gain income from the sale of a New Mexico business. 

Washington is another state that recently enacted a tax on capital gains, even though the state doesn’t have a personal income tax. The state’s 7 percent tax on long-term capital gains has survived many legal battles and even weathered a recent ballot initiative to get rid of it with 63 percent of residents voting to maintain the tax. With this victory, the state will keep roughly $2 billion in its coffers each year to fund important public goods like child care, early education, and schools. 

These policies are modest and promising steps at rebalancing the tax system and the fact that Black women have 90 percent less wealth than white men. By raising new revenues, these states are also replenishing state budgets with funds to invest in financial security, education, and transportation programs that can help Black women – and all families. 

State Child Tax Credits Show How a Black Women Best Approach Helps All Children  

Years of deep cuts to personal and corporate income taxes have made it more difficult for states to invest in public services that help communities thrive. The Black Women Best approach exposes these harms while presenting sensible solutions that help states achieve prosperity.

A long history of discrimination has led to lower wages and therefore lower incomes for many Black women. For these women and their families, refundable tax credits are often a critical lifeline.

The Child Tax Credit (CTC) helps low- and middle-income families cover the rising costs of raising children. However, many families are too poor to be eligible for the federal CTC, making state CTCs even more important for the children in these families. As a result, many poor children are not eligible for the federal credit but can receive a state credit, depending on the policy design.  Black children are especially harmed by these limits. An estimated 45 percent of Black children do not receive the full credit, roughly double the percentage of their white peers who are left out.

Progress in the expansion of CTCs means states are selecting CTCs to provide financial security for low- and middle-income families in their states. This year alone, Colorado, New York, and Utah expanded their CTCs while the District of Columbia created a new CTC that will begin in 2025. For the 2025 tax year, 15 states and DC will offer CTCs that are targeted to those that most need help and are refundable so that the poorest children are not excluded from the full benefit. This approach helps families the most and reduces child poverty, now a reality for too many Black children.

Centering the wellbeing of Black women means further enhancing CTCs to provide better benefits to more people. To help lower-wage women of all races state CTCs should be fully refundable, meaning that children in families with no or low earnings should be eligible for the full credit. Credit amounts should be indexed to inflation, so beneficiaries do not see erosion of the purchasing power of their benefits. Lastly, to build off the success of the 2021 expansion of the federal CTC, state CTCs can be made available monthly to help families pay bills as they arrive.

Apply Black Women Best During the 2025 State Tax Debates 

Using the Black Women Best framework provides a path for policymakers to help Black women thrive and therefore help all households prosper. Focusing policy analysis on Black women illustrates how Black women have long shouldered the shortcomings of the economy and clearly points to solutions that work for all. Black women are at their best when they are financially secure, healthy, and free – and our economy is at its best when all people can thrive and benefit.

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