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Prosperity Now: Tax Cuts and Jobs act will supercharge racial wealth divide, finds first-time analysis

Prosperity Now, October 11, 2018: Tax Cuts and Jobs Act Will Supercharge Racial Wealth Divide, Finds First-Time Analysis

On the heels of a stunning report showing how the Trump family kept and built its wealth through tax fraud and exploiting loopholes, a paper by Prosperity Now and the Institute for Taxation and Economic Policy (ITEP) finds the 2017 Tax Cuts and Jobs Act, Congress’s and the Trump Administration’s signature piece of tax legislation, unequivocally rewards white wealth at the grave expense of households of color. The tax law’s racist underpinnings come into harsh light through a first-time quantitative look at the distributional impact of the law by income and race using ITEP’s microsimulation tax model.

Despite the bill’s proponents advertising it as legislation benefiting the middle class, researchers at Prosperity Now and ITEP show that 72 percent of the tax cuts go to the nation’s richest 20 percent of households. Eighty percent of the cuts go to white households, further widening a Racial Wealth Divide that has become a defining feature of American life.

The report also shows that setting race aside, it will take middle class families 50 years to get to the same average tax cut the richest one percent of households will receive in just one year.

Key findings from the paper include:

  • Of the $275 billion in tax cuts to individuals this year, $218 billion (80%) goes to white households who make up only 67 percent of taxpayers. On average, white households will receive $2,020 in cuts, while Latino households will receive $970 and Black households receive $840.

  • More than 40 percent of all tax cuts from the Tax Cuts and Jobs Act go to the White households in the top 5 percent of earners, despite only representing 3.9 percent of all tax returns.

  • Households of color are disproportionately represented in low- and middle-income groups which helps to explain why a tax bill so heavily tilted to the wealthy would leave them behind.

  • Absent major federal policy intervention, it will take median Latino families over 2,000 years to match the wealth median of white households today and median Black households are left with zero wealth during the second half of this century.

  • Even among the super wealthy, the disparity is alarming. White households in the top 1 percent will receive over $52,400 a year from the Trump tax cuts. Black, Latino, and Asian households: $19,290, $19,850, and $35,690, respectively.

Rejecting the notion of “trickle-down economics,” ITEP and Prosperity Now’s latest paper calls for expanding and reforming the Estate Tax and leveraging those public dollars to invest in opportunity for all, particularly for children of low-and moderate-income families.

 

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