While lawmakers often speak about income inequality, less attention is paid to wealth inequality. Wealth is distributed even more unequally than income in the U.S. in ways that reinforce racial divides, leave some households with too little to handle unexpected expenses, and enable some households to pass down enormous intergenerational wealth. A renter tax credit is one tool lawmakers can use to reduce wealth inequalities both within racial and ethnic groups and between these groups. As we show in our new analysis, Black and Hispanic households are more likely to be renters and hold less wealth than white households.
Refundable Tax Credits
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blog March 3, 2025 A Well Targeted Federal Renter Credit Could Help Reduce Wealth Gaps
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report March 3, 2025 High-Rent, Low-Wealth: Addressing the Racial Wealth Gap through a Federal Renter Credit
For many decades, the United States has experienced growing wealth inequality between the richest and poorest households and between households of different races. While the federal tax code has some policies focused on raising income of low earners, it contains fewer provisions designed specifically to address wealth inequality. The stark economic and racial wealth gap in the country necessitates a policy solution, and tax policy reform provides some innovative possibilities. A federal tax policy that could benefit low-wealth families is a renter tax credit (RTC). This paper uses data from the Survey of Consumer Finances to show that refundable tax credits geared toward low- and moderate-income renters could offer a targeted means of reaching low-wealth households. Conditioning credit eligibility on both renter status and income can ensure that a higher share of the credit will flow to low-wealth individuals than if the credit was conditioned on either of these criteria in isolation. A RTC offers a simple, administratively practical means of reaching low-wealth populations through the federal tax code without requiring a comprehensive measurement of every household’s wealth.