Yet the racial implications of Trump’s tax scam have been radically underreported and remain poorly understood. While fair tax reform could reduce the impact of structural racism in the economy, the law that Republicans passed in December will make it much worse.
That’s the conclusion of an important new report from economists Darrick Hamilton and Michael Linden of the Roosevelt Institute (where I serve on the board). As the institute has documented, the U.S. economy is shaped by informal rules that create disparities that harm people of color in virtually every part of society. Many of these “hidden rules of race” can be found in the federal tax code.
“Far from addressing, fixing, or improving the hidden rules of the tax code that disadvantage people of color, the new law strengthened some of these rules and even added new ones,” they write. “The sum total effect of the Trump tax law is likely to further increase the economic disparities, particularly with regards to wealth, between white Americans and communities of color.”
Start with the obvious fact that it disproportionately benefits corporations and the rich. This will clearly lead to greater economic inequality in general, but it will also exacerbate the racial wealth gap, because the wealthiest Americans are overwhelmingly white. As the Roosevelt report notes, median net worth among white households is about 1,200 percent larger than it is among their black counterparts. Any tax policy skewed toward the wealthy, then, is also racially skewed against people of color.
Furthermore, while the richest Americans reap the benefits of the law, many workers at the bottom of the income ladder, where people of color are overrepresented, will actually see an overall tax increase over time. That means the law effectively raids black and brown Americans’ paychecks to fatten the investment accounts of the largely white financial elite.
Aside from its impact on the racial wealth gap, other elements of the law could have indirect but potentially devastating consequences for communities of color. For example, imposing limits on state and local tax deductions will make it harder for state and local officials to fund public services through progressive tax increases. This could lead to a greater reliance on fines and fees to raise revenues, including speeding tickets, bail and even civil asset forfeitures (which the American Civil Liberties Union has denounced as “legalized theft”). As Hamilton and Linden explain, the costs of these punitive measures tend to fall most heavily on people of color, with the additional consequence of increasing their exposure to a broken and racially biased criminal-justice system. Not only are fines and fees regressive, they write, but also “the fiscal imperative to raise revenue from the criminal justice system is likely to cause more people of color to become ensnared in that system and to suffer the long-term consequences.”
The tax cuts also invite further spending cuts that could threaten the economic security of black families in particular. Huge losses in revenue as a result of the law will undermine the public sector and could lead to job losses at every level of government, as happened when revenue plummeted in the aftermath of the Great Recession. If that happens, the Roosevelt report explains that black workers would be the hardest hit “because fully 1-in-5 black workers is employed in the public sector.”
Meanwhile, the GOP has already begun citing rising deficits to make the case for deep cuts to safety-net programs that would be devastating for poor families across the country. House Republicans have spent much of the past few months attempting to slash food stamps, while their latest budget plan would reduce Medicaid spending by $1.5 trillion. Last week, the White House also proposed a radical reorganization of the federal government that would put all social welfare programs under a single agency, a move that both progressives and conservatives say would make them easier to target for cuts.
Trump’s tax law doesn’t only lavish riches on the most powerful members of society. It’s also a vehicle for disempowering the working poor and communities of color. Americans deserve better than a tax scam that exacerbates the structural racism and inequality that have plagued our country for so long.