Last month, my colleague Chad Bolt wrote a blog about the upside-down tax implications of the now-defunct-but-maybe-not-completely-gone American Health Care Act (AHCA). In it, Chad walked through how the AHCA would have taken some of the most right-side up tax credits created by the Affordable Care (ACA)—which are used by countless Americans each year to afford their coverage—and flipped them completely upside-down. Indeed, while the heart of the ACA/AHCA fight was about preventing 24 million Americans from losing their health coverage, it was also about taxes. More specifically, it was about ensuring that the more than $500 billion we’re slated to spend over the next decade through the tax code for healthcare continues to provide greater, more equitable support to those that need it the most. Now that the attempt to repeal and replace the ACA is behind Republicans in Congress and the President, both have already begun to move on to their next big ticket item: comprehensive tax reform.
While we can’t predict what the future holds, we can expect that much of the rhetoric around comprehensive tax reform will range from providing middle-class tax cuts, to boosting to our economy, to preventing huge tax cuts for the rich. As important as these discussion points are going to be during this debate, we’d be remiss if we didn’t say that these conversations around tax reform also have to be inclusive of race and the role that our current tax code plays in the ever-growing racial wealth gap.
While the IRS does not collect race data, researchers have found that the problems with the upside-down tax code aren’t limited to just benefits accruing mostly to those at the top, they’re also about those benefits overwhelmingly being concentrated in White households regardless of income. For example, in 2014, our partners at PolicyLink published research that not only reaffirmed the fact that high-income earners take a lion share of the most value tax breaks available—including exclusions, itemized deductions and investment tax breaks—it also revealed that across every income quintile, a majority of tax benefits are going to White households.
By and large, our tax code is the single largest tool the federal government uses to provide families with the support they need to build life-long wealth. Ever year our tax code spends $660 billion to help families buy a home, start a business, build retirement savings or even go to college. Unfortunately, much of that spending is going to support millionaires to build more wealth while providing little support for working families to do the same. Even more unfortunate then that, as PolicyLink’s work highlights, our tax code is also simultaneously bypassing communities of color who in just under a generation will command majority share of our nation’s population and our overall economic future.
We know that the economic challenges facing communities of color are great and that the task of closing the racial wealth gap is even greater but tax reform presents a once-in-a-lifetime opportunity to tackle these issues, all without spending new resources.
As Congress and the President pivot to tax reform, we hope that they, along with advocates throughout the country, take action to elevate this important piece of the tax reform conversation as it will be critical towards creating a more fair and equitable tax code that works for all families, particularly those of color.
Editors Note: This article originally appeared on the CFED’s blog, The Inclusive Economy.