June 18, 2024

Roosevelt Institute: When Tax Policy Discriminates: The TCJA’s Impact on Black Taxpayers

ITEP Work in Action

We found that black taxpayers who looked like their white counterparts in terms of these and other demographic factors paid higher taxes because the IRC favors certain behaviors and benefits that are closed to black people. For example, black people were then (and are now) less likely to receive valuable employer-provided tax benefits such as the opportunity to save for retirement tax-free, up to $50,000 of tax-free life insurance, and reimbursement for employee business expenses. A long history of federal government actions created and sustained redlining, making black people less likely to own homes and thus barred from receiving the home mortgage interest deduction and the deduction for state and local taxes, while also making it more difficult for black taxpayers to escape the standard deduction to get the benefit of other itemized deductions through IRS Form 1040 Schedule A. A long American history gave white people wealth while it made black people property, and so kept the benefits of the capital gains rate from Black taxpayers. The list of inequalities was extensive and, in the end, we inspired a generation of scholars to produce quantitative research on racial tax disparities.

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