Inequality

President Biden’s American Families Plan includes revenue-raising proposals that would affect only very high-income taxpayers.[1] The two most prominent of these proposals would restore the top personal income tax rate to 39.6 percent and eliminate tax breaks related to capital gains for millionaires. As this report explains, these proposals would affect less than 1 percent of taxpayers and would be confined almost exclusively to the richest 1 percent of Americans. The plan includes other tax increases that would also target the very well-off and would make our tax system fairer. It would raise additional revenue by more effectively enforcing tax…

Earlier this year, ITEP released a report providing an overview of the impacts of state and local tax policies on race equity. Against a backdrop of vast racial disparities in income and wealth resulting from historical and current injustices both in public policy and in broader society, the report highlights that how states raise revenue to invest in disparity-reducing investments like education, health, and childcare has important implications for race equity.  

The onslaught of news about multiple states introducing or passing legislation to make it harder to vote is a clear signal that our democracy is in crisis. Decades of policymaking and judicial rulings have created a system in which the voices of the wealthy and powerful have more weight, and some lawmakers are determined to further rig the system and keep it that way.

Historic and current injustices, both in public policy and in broader society, have resulted in vast disparities in income and wealth across race and ethnicity. Employment discrimination has denied good job opportunities to people of color. An uneven system of public education funding advantages wealthier white people and produces unequal educational outcomes. Racist policies such as redlining and discrimination in lending practices have denied countless Black families the opportunity to become homeowners or business owners, creating extraordinary differences in intergenerational wealth. These inequities have long-lasting effects that compound over time.

The Biden administration has made clear that its top priorities include a major recovery package with critical investments to boost the nation’s economy and tax increases for corporations and the wealthy. Adequately funding the IRS must be part of that agenda. It seems every week, a new study, data set or research-driven commentary reveals how […]

With the onslaught of news about billionaire wealth soaring while low- and moderate-income families have trouble making ends meet, a federal wealth tax makes good economic and fiscal sense—and the public supports it. One poll found that 64 percent of respondents favor the idea, including a majority of Republicans.

Without bold investments now, experts predict a longer, more unequal recovery. President Biden's American Rescue Plan, the framework for legislation expected to pass this week in the House, would boost economic well-being for those whose livelihoods were most affected by the pandemic-induced economic crisis.

Should lawmakers enact laws that they believe are sensible and constitutional, or should they shape their legislative agenda around what they believe ideological Supreme Court justices will allow? This is a dilemma facing Americans who support a federal wealth tax.

Many 1990s policies were grounded in harmful, erroneous ideas such as financial struggles are due to personal shortcomings and less government is better. Lawmakers didn’t apply these ideas consistently, however. For example, there was no drive to reduce corporate welfare even as policymakers slashed the safety net and disinvested in lower-income communities. So, it’s not surprising that a bipartisan group of lawmakers concluded during that era that the CTC was an appropriate vehicle to give higher-income households a tax break while leaving out poor children.

The Biden administration’s move last week to establish an interagency working group to examine how well data is broken down, or disaggregated, within public sector data sources is welcome news. The executive order specifically names the limited availability of datasets disaggregated “by race, ethnicity, gender, disability, income, veteran status, [and] other key demographic variables.”

It will not magically become easier for families to put food on the table or make their next rent payment. Policymakers must act. People are struggling because they are either out of work, involuntarily working part-time, trying to financially catch up after being out of work for a spell, or squeaking by because we live in a wealthy democracy that fails to guarantee basics such as access to affordable housing, health care, food, and jobs that pay living wages.

While the results of the 2020 presidential election are all but set in stone—and a sign of life for progressive policy—the results of state tax ballot initiatives are more of a mixed bag. However, the overall fight for tax equity and raising more revenue to invest in people and communities is trending in the right direction.

Better tax policies will help communities emerge from the current staggering fiscal crisis with tax structures that reduce inequality at a time when rich people are thriving and public services are under siege. Preserving public spending will boost the economy and improve lives–and cutting these essentials will not only hurt people but also deepen the downturn, a lesson we learned in the Great Recession’s slow recovery. Other states should take note.

Obstructing policies that improve economic well-being should not be on any party’s legislative agenda, especially when so many are barely keeping their heads above water.

The president’s apparent abuse of everything from hair-care deductions to consulting fees for family members raises questions about whether Trump was fast and loose with tax loopholes or whether the IRS simply wasn’t enforcing the law. Either way, Trump successfully flouting or pushing the limits of the law shouldn’t come as a surprise: Congress has cut IRS funding, in real terms in each of the last 10 years.

It’s time for a new approach. Trump’s egregious tax avoidance further exposes a system that preserves an enormous and growing economic divide. Congress has gutted IRS funding so that we don’t have the resources to audit wealthy tax avoiders. And lobbyists continue to secure giveaways for corporate clients that do nothing for our communities.

While the moneyed elite were dangling shiny objects, scapegoating Black and brown people, denigrating immigrants, and financing studies to convince us that poor people are the problem, they were concurrently securing policies that cut taxes primarily for the rich and profitable corporations, deregulated industry, weakened unions and attacked voting rights. This and more allowed the rich to amass even more wealth and power.

This November, Illinoisans will decide whether to amend the state constitution to allow a graduated income tax. A “yes” vote on the Illinois Fair Tax constitutional amendment will make effective legislation that will replace the current flat tax rate of 4.95 percent with graduated rates that cut taxes for those with taxable income less than $250,000 and institute higher marginal rates on taxable incomes greater than $250,000.

A new study finds that over the last 20 years, Illinois’s tax system has effectively sapped $4 billion more from Black and Hispanic communities than it would have under a graduated income tax while also allowing the state’s highest-income (mostly white) households to pay $27 billion less in taxes, the Institute on Taxation and Economic Policy (ITEP) said today.

Flat or graduated personal income taxes have varying effects on the annual individual tax liabilities of taxpayers at different income levels. Less examined is how tax structures affect income inequality and racial wealth gaps. This brief illustrates how Illinois’s historic flat income tax structure compares to the proposed Fair Tax through a multi-year retrospective analysis. It shows that Illinois’s flat income tax in lieu of a graduated rate tax used by most states amounts to a tax subsidy for the wealthiest Illinoisans that compounds income inequality and racial wealth gaps.

More families across our nation are struggling to meet their most basic needs. High unemployment, the struggle to put enough food on the table, and an inability to make rent or mortgage payments are widespread. Absent federal intervention, outcomes would have been worse. Over the past few months, federal and state relief measures have mitigated hardship. By putting cash in the hands of those who need it most, lawmakers were able to stabilize some families’ budgets and prop up our fragile economy. With time we will surely glean many lessons from 2020. But the sheer power of targeted assistance is already apparent. 

Racial justice requires tax justice. Economic justice requires tax justice. Climate and health justice require, yes, tax justice.

Reductions in critical state and local investments, including health care and education, would only exacerbate the economic crisis brought on by COVID-19 and worsen racial and income inequality for years to come. Higher taxes on top earners are among the best options for addressing pandemic-related state revenue shortfalls in the coming months.

The biggest danger we face right now is that politicians will fail to get this health crisis under control and Americans will continue to die. The second biggest danger is that elected officials will fail to help families and communities, leading to foreclosures, evictions, and impoverishment—and also torpedoing the economy. With their inaction this week, the Senate seems determined to do both. Hold on everyone, we’re in for a sickening ride.