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Download AudioTrump Tax Cuts Deepen Racial Wealth Disparities for Black Americans
By Darius Spearman (africanelements)
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| KEY TAKEAWAYS |
|---|
| The Tax Cuts and Jobs Act (TCJA) of 2017 has worsened economic inequalities for Black Americans. |
| Over 80% of tax cuts from the TCJA were allocated to corporations and wealthy individuals. |
| Racial disparities in homeownership and stock ownership have been exacerbated by the TCJA. |
| Healthcare access has significantly declined for low-income and Black individuals due to the TCJA. |
| The shift to chained CPI has resulted in smaller benefit increases detrimental to low-income groups. |
| The upcoming expiration of TCJA provisions in 2025 presents a chance for crucial tax policy reforms. |
Trump Tax Cuts Increase Racial Wealth Gaps
The Tax Cuts and Jobs Act (TCJA) of 2017, signed by Donald Trump, has impacted Black Americans’ economic progress negatively. This major tax reform was praised as beneficial for everyone, but it widened racial wealth gaps in the United States. Its influence on middle and low-income Black Americans has been especially harmful, reinforcing existing financial inequalities.
The largest benefits of the TCJA went straight to corporations, tax partnerships, and wealthy individuals. Over 80% of the cuts benefited these privileged groups, leaving little for the middle class and adversely affecting Black taxpayers (NewsOne). This uneven distribution of tax relief has locked in existing economic divisions, making it tougher for Black Americans to achieve higher economic status.
Income Disparities by Race ($75,000+ Income Group)
Homeownership and Stock Market Participation: Two Different Realities
The TCJA clearly favored white Americans over minorities in homeownership and stock ownership. These two key ways to build wealth have always been harder for Black Americans to access, and the TCJA intensified this problem (NewsOne).
Homeownership, a key part of the American Dream, remains out of reach for many Black families. The tax law’s changes to mortgage interest deductions and property tax limits favor high-income homeowners in pricey markets. These markets often lack Black representation because of past unfair housing practices.
The stock market presents a similar gap in wealth. About 66% of white families own stocks, compared to fewer than 40% of Black families. This gap continues even when comparing Black families to white families with similar incomes (NewsOne). The TCJA’s corporate tax breaks, like the pass-through income deduction, mainly help industries such as real estate and manufacturing—sectors with mostly white ownership (NewsOne). These cuts increase wealth gaps by boosting white investors’ portfolios.
TCJA’s Effects on Healthcare Access
The repeal of the individual mandate under the Affordable Care Act has significantly impacted healthcare access for Black Americans. This change caused a large decrease in health coverage, mainly affecting low-income individuals and Black Americans (NewsOne).
The mandate ensured a broad risk pool to keep insurance affordable. Its repeal resulted in higher premiums and limited coverage choices, affecting communities already struggling with healthcare access. For many Black Americans, this means hard choices between basic needs and health insurance.
Understanding the Chained CPI: A Hidden Tax Increase
The chained Consumer Price Index (CPI) is a method used to calculate inflation adjustments for tax provisions. Unlike the traditional CPI, the chained CPI accounts for changes in consumer spending patterns as prices change. While this might seem like a minor technical detail, it has significant implications for taxpayers (Tax Policy Center).
By using the chained CPI, the tax code’s brackets and deductions grow more slowly over time. This means that as incomes rise with inflation, people move into higher tax brackets more quickly, effectively increasing their tax burden. For low-income and Black Americans, who are more likely to rely on critical tax credits and benefits, this results in a gradual reduction of their after-tax income. Over the years, this “hidden tax increase” erodes purchasing power and makes it harder to achieve financial stability. Therefore, the adoption of the chained CPI under the TCJA acts as a silent contributor to widening economic disparities.
The Individual Mandate Repeal: Health Care Access at Risk
The individual mandate was a provision of the Affordable Care Act (ACA) that required everyone to have health insurance or face a penalty. Its primary goal was to ensure a mix of healthy and sick individuals in the insurance pool to keep premiums affordable. The TCJA repealed this mandate, starting in 2019, which led to fewer healthy individuals signing up for insurance (Cornell Law School).
This repeal has particularly harmed Black Americans, who already face barriers to healthcare access. Without the mandate, insurance premiums have risen due to a smaller and sicker insurance pool. Higher costs make it difficult for low-income individuals to afford coverage, forcing many to forgo insurance altogether. Consequently, health disparities worsen, and preventable diseases remain untreated, adding another layer to the systemic challenges faced by Black communities.
Systemic Barriers: The Roots of Economic Inequality
Economic disparities don’t exist in a vacuum; they are the result of longstanding systemic barriers. These are obstacles embedded within policies, institutions, and practices that disproportionately hinder Black Americans from achieving economic success. Examples include discriminatory lending practices, unequal educational opportunities, and biases in hiring and promotions (Brookings Institution).
The TCJA, by favoring high-income earners and corporations, reinforces these barriers. Tax benefits like the mortgage interest deduction and pass-through income deductions are more accessible to those who already have substantial wealth. Since Black Americans are underrepresented in these high-income brackets due to systemic barriers, they benefit less from such tax provisions. This perpetuates a cycle where the rich get richer, and marginalized communities continue to struggle.
What Is Intergenerational Wealth Transfer?
Intergenerational Wealth Transfer: This is the passing of assets from one generation to the next. It includes money, property, investments, and other valuables. For many Black families, historical injustices have limited the ability to accumulate and transfer wealth. This leads to ongoing economic disparities, as each generation starts with fewer resources (Brookings Institution).
Addressing Policy Options: A Roadmap to Equality
To combat these disparities, we need policy changes that directly address the economic challenges faced by Black Americans. Implementing a more progressive tax structure would ensure that high-income individuals and corporations contribute a fair share. This could fund programs that provide educational opportunities, affordable housing, and healthcare access for marginalized communities.
Moreover, introducing incentives for minority-owned businesses can foster entrepreneurship and job creation within Black communities. Tax credits and grants can help overcome the initial financial hurdles that often prevent business ownership. By taking these steps, policymakers can begin to dismantle the systemic barriers that have long hindered economic progress for Black Americans.
Chained CPI and Its Hidden Impact
The TCJA’s change to the chained consumer price index (CPI) for inflation adjustments affects low-income and Black taxpayers deeply (NewsOne).
Distributional Analysis of Trump’s Tax Plan
The tax plan would lead to a tax cut for the richest 5% of Americans and a tax increase for all other income groups, with the middle 20% facing a tax increase equal to 2.1% of their income and the poorest 20% facing a tax increase equal to 4.8% of their income.
Source: A Distributional Analysis of Donald Trump’s Tax Plan
Permanently Extending the TCJA
Extending the TCJA would increase after-tax income across the income distribution, but the benefits would be skewed towards high-income households, with the top 1% receiving an average tax cut of $36,300.
Source: The Budgetary and Economic Effects of Permanently Extending the TCJA
The chained CPI usually leads to smaller increases in benefits, like the earned income tax credit. Over time, this reduces purchasing power for those dependent on these benefits the most. Black Americans, often in lower-income brackets, see this as a gradual decline in economic health.
TCJA Expiration: A Chance for Change
With key parts of the TCJA expiring on December 31, 2025, lawmakers face a critical time in tax policy (NewsOne). This deadline offers a chance to address the racial gaps made worse by recent tax changes.
The end of the TCJA’s corporate tax benefits has big effects on U.S. businesses, including corporate tax rates and international taxation changes (NewsOne). How these parts are handled will impact economic equality and racial wealth gaps.
With elections around the corner, Republicans are leaning toward extending or changing the expiring tax rules (NewsOne). Nonetheless, this scenario also presents a chance for progressive voices to advocate for fairer tax reforms that tackle systemic hurdles faced by Black Americans.
A Path Forward in Tax Policy Reform
As the TCJA’s deadline nears, policymakers must create tax laws promoting economic fairness. This demands they look deeper than surface changes and address the core issues causing racial wealth gaps.
- Using progressive tax systems to ensure fair contributions from the wealthy
- Providing targeted tax credits for low and middle-income families
- Offering incentives for minority business ownership
- Reforming estate taxes to halt wealth inequality transfer
Black American Economic Disparities: Taking Action
The TCJA’s impact on Black Americans reminds us of the ongoing fight for economic fairness. It shows the need for thorough solutions to address racial wealth gaps, including changes in housing, education, healthcare, and job practices.
While tackling these challenges, centering Black Americans’ experiences in decision-making processes is vital. A united effort to eliminate systemic barriers and create real opportunities can lead to a fairer and more equal society for everyone.
FAQ
Q: What is the main impact of the Trump Tax Cuts on Black Americans?
A: The Trump Tax Cuts, particularly the Tax Cuts and Jobs Act (TCJA) of 2017, have significantly worsened racial wealth disparities, harming middle and low-income Black Americans and entrenching systemic barriers to their economic advancement.
Q: How are the TCJA’s benefits distributed among different income groups?
A: Over 80% of the TCJA’s benefits were allocated to corporations, tax partnerships, and high-net-worth individuals, leaving minimal relief for the middle class and disproportionately harming Black taxpayers.
Q: In what ways does the TCJA affect homeownership for Black families?
A: The TCJA’s changes to mortgage interest deductions and property tax caps mostly benefit high-income homeowners, making homeownership increasingly unattainable for many Black families due to historical discriminatory policies.
Q: What are the healthcare implications of the TCJA?
A: The repeal of the individual mandate under the ACA led to higher premiums and reduced insurance coverage, disproportionately impacting lower-income individuals and Black Americans who struggle with healthcare access.
Q: What reforms could address the issues created by the TCJA?
A: Reforms could include progressive tax structures, targeted credits for low-income families, incentives for minority-owned businesses, and adjustments to inheritance taxes to reduce wealth inequality.
ABOUT THE AUTHOR
Darius Spearman is a professor of Black Studies at San Diego City College, where he has been teaching since 2007. He is the author of several books, including Between The Color Lines: A History of African Americans on the California Frontier Through 1890. You can visit Darius online at africanelements.org.
