This week, as we honor Juneteenth, we are reminded of the delayed arrival of emancipation news to Black Americans. This delay is emblematic of ongoing disparities, including those found within the United States tax system. As the temporary provisions of the Tax Cuts and Jobs Act (TCJA) near their 2025 expiration, Congress faces a critical decision. It can either extend provisions that exacerbate income, wealth disparities, and racial injustices or enact reforms that foster greater tax fairness.
Historical evidence underpins concerns about the tax code’s unfair treatment of Black taxpayers. In 1996, William Whitford and Beverly Moran demonstrated that Black taxpayers are treated more harshly than their white counterparts with equivalent taxable characteristics. Additionally, Melvin Oliver and Thomas Shapiro illustrated how the tax code has perpetuated racial discrimination, contributing to income and wealth inequalities.
The child tax credit (CTC) provides a clear example of how well-intentioned policies may still yield unequal results. Although unified in their belief that the CTC, additional child tax credit (ACTC), and family credit were designed to support American children, especially those in impoverished conditions, the execution falls short. A study by Jacob Goldin and Katherine Michelmore found that while 90% of families benefit from the TCJA’s modifications to the CTC, poor, Black, and Hispanic families enjoy fewer advantages. The poorest families often receive no benefits at all.
According to analysis, most children within the bottom 10% of household incomes do not qualify for the CTC, while nearly all children in the top 50% are eligible for the full $2,000 credit. Furthermore, about 75% of white and Asian children receive the full $2,000, in stark contrast to only 50% of Black children. Black children constitute 25% of those ineligible for the CTC, despite representing only 14% of all children.
The TCJA provision limits the refundable part of the CTC to $1,400 per child and requires a minimum of $2,500 in earned income, criteria that often exclude the poorest families. This exacerbates existing income and wealth inequalities and contributes to racial disparities. The restrictive policies of the TCJA mirror the exclusions originally found in Social Security, which initially left out many jobs predominantly held by Black Americans.
Given these inequities, there is a pressing need for Congress to address and amend provisions that increase both wealth and racial disparities. As we commemorate Juneteenth and the ongoing struggle for equality, this moment offers an opportunity for legislative reforms to rectify historical and ongoing economic disadvantages. A reformed tax code that promotes fairness and economic growth for all Americans is imperative.
For more in-depth analysis, please refer to the original article on Bloomberg Tax.