April is a reminder that a racially equitable tax code is possible
This month, millions of Americans filed taxes. For many, tax season is little more than a burden or annoyance — one more thing to cross off the to-do list.
But as leaders of organizations who fight every day for marginalized communities, we see our nation’s notoriously complicated tax system as a primary driver of racial inequality. It doesn’t have to be this way. America’s tax system can be one of our most powerful tools to advance racial equity and create opportunity for all — but only if we are bold enough to reform it.
First, we must reinstate the expanded Child Tax Credit (CTC) and Earned Income Tax Credit (EITC). In 2021, the American Rescue Plan gave millions of families access to these transformational programs for the first time. The results were immediate and astounding, particularly for communities of color.
Prior to the expansion, nearly half of all Black and Latinx children had been excluded from the full benefit because their families did not make enough income to qualify. The expansion of the Child Tax Credit doubled the number of Black and Hispanic families eligible for full support, and 26 million children across the United States began receiving the full benefit of the credit for the first time. But by January, 3.7 million children fell back into poverty when Congress failed to renew the program. This was an unconscionable mistake.
To create a more racially equitable tax code and build back for justice, Congress must permanently expand the Child Tax Credit and the Earned Income Tax Credit — two of the most powerful policy levers we have to increase opportunity and advance racial equity.
Second, we must ensure families who are eligible for expanded tax credits can actually access them. Our nation’s tax policy, safety-net programs and benefits are overwhelmingly complicated, requiring the most vulnerable among us to jump through hoops and red tape every time they file. That’s why our organizations are proud to support the Volunteer Income Tax Assistance program (VITA), which helps low-income families file their taxes and access critical tax credits.
Every year, tens of thousands of IRS-certified volunteers trained by VITA non-profit organizations — working at sites in every state — ensure that low-income households can claim and keep the benefits they have earned. In 2021, more than 2,800 VITA sites prepared nearly one million returns, generating more than $1.7 billion in refunds to lower-income families and maintaining a 96 percent accuracy rate — the highest in the industry. While the work of organizations like VITA is critical, we should make it a national priority to overhaul our nation’s tax system and make it easier for families to receive the assistance they need.
Third, we need a fully-funded Internal Revenue Service so that the system works for everyone. This year, we know that many tax filers can expect delays in receiving their refunds, which can make up a significant portion of a family’s annual income. These delays will disproportionately impact low-income taxpayers, many of whom are households of color. With appropriate funding levels, however, the IRS would be able to avoid these back-ups and ensure American families receive the refunds they rely on.
Limited IRS funding also means that EITC recipients are more likely to be audited than wealthier Americans, even though the richest individuals and businesses are responsible for a larger percentage of uncollected taxes. The IRS itself has admitted it’s simply easier and less expensive than auditing wealthier households with more complex tax returns. The result is disproportionate auditing of communities of color — many of the counties with the highest audit rates are predominantly Black, Latinx or Native American. Fully funding the IRS not only ensures the timely delivery of benefits but is also a critical step toward ensuring fairness and equal treatment under the law.
America’s tax code can be a powerful force for economic opportunity and racial equity, but only if we fight to make it so. This tax season, national policymakers must do more to expand eligibility for tax credits to the families who need them most, make it easier for families to access these benefits and ensure tax rules are fairly and equally enforced. Only then can we build a racially equitable tax code and an economy that works for all Americans.