Five ways the GOP tax plans help wealthy whites and hurt mi­nori­ties

Pro­pos­als would widen eco­nomic gulf, say civil rights and lib­eral groups

The Washington Post - - ECONOMY & BUSINESS - BY TRACY JAN

Repub­li­can pro­pos­als to over­haul the tax code would largely ben­e­fit wealthy white Amer­i­cans and fur­ther widen the eco­nomic gulf be­tween them and mi­nor­ity com­mu­ni­ties, ac­cord­ing to pol­icy an­a­lysts for lib­eral think tanks and civil rights groups.

Al­ready, white fam­i­lies have nearly 10 times the me­dian net worth of black fam­i­lies and more than eight times that of His­panic fam­i­lies, ac­cord­ing to the lat­est Fed­eral Re­serve data.

Fif­teen per­cent of white fam­i­lies re­ported be­ing mil­lion­aires in 2016, com­pared with just 2 per­cent of black and His­panic fam­i­lies.

“All this tax bill does is fur­ther con­cen­trate wealth in the hands of a small group of mostly white in­di­vid­u­als,” said Danyelle Solomon, direc­tor of Progress 2050, a team at the left-lean­ing Cen­ter for Amer­i­can Progress that an­a­lyzes the im­pact of gov­ern­ment poli­cies on mi­nor­ity com­mu­ni­ties.

Here’s how the GOP plans would ce­ment white wealth and hurt com­mu­ni­ties of color:

1. The es­tate tax

Re­peal­ing or rolling back the es­tate tax would al­most ex­clu­sively ben­e­fit wealthy white heirs. Nine out of 10 house­holds with as­sets above the es­tate tax thresh­old of $5.5 mil­lion (or $11 mil­lion per cou­ple) are white. The House plan would phase out the es­tate tax, first dou­bling the ex­emp­tion be­fore elim­i­nat­ing it en­tirely by 2024. The Se­nate bill keeps the es­tate tax but dou­bles the thresh­old to $11 mil­lion (or $22 mil­lion per cou­ple).

Even un­der the cur­rent es­tate tax rules, only the wealth­i­est 0.2 per­cent of Amer­i­cans leave be­hind as­sets valu­able enough to tax, ac­cord­ing to the non­par­ti­san Tax Pol­icy Cen­ter.

2. The cor­po­rate in­come tax

Slash­ing cor­po­rate tax rates from 35 per­cent to 20 per­cent, as both House and Se­nate bills plan to do by 2019, will mainly in­crease share­holder wealth, as there is scant ev­i­dence the ex­tra in­come would trickle down to work­ers in the form of higher pay, Solomon said.

White fam­i­lies are twice as likely as black and His­panic fam­i­lies to in­vest in the stock mar­ket, with 60 per­cent of whites own­ing stocks com­pared with less than one-third of blacks and His­pan­ics, ac­cord­ing to re­cently re­leased Fed data.

3. The qual­i­fied tu­ition re­duc­tion

The House plan would start to tax the tu­ition break grad­u­ate stu­dents re­ceive in ex­change for re­search or teach­ing as­sis­tance. Do­ing so would re­move a key in­cen­tive for stu­dents to pur­sue doc­toral pro­grams and raise stu­dents’ tax bills, Solomon said.

The pro­posal would make it even harder for African Amer­i­cans and His­pan­ics to im­prove their eco­nomic fu­tures by en­rolling in ad­vanced de­gree pro­grams — where they are al­ready un­der­rep­re­sented.

4. The stu­dent loan in­ter­est de­duc­tion

The House also wants to elim­i­nate the stu­dent loan tax de­duc­tion that al­lows Amer­i­cans with gross in­come of $65,000 a year or less to deduct $2,500 in in­ter­est pay­ments on their stu­dent loans.

Do­ing so would dis­pro­por­tion­ately hurt African Amer­i­cans, Solomon said, be­cause they are more likely to in­cur stu­dent loan debt as well as fall within the in­come bracket to earn the full de­duc­tion.

Nearly a third of black house­holds re­ported hav­ing ed­u­ca­tion loans in 2016, com­pared to a fifth of white and His­panic fam­i­lies, ac­cord­ing to Fed data.

5. Pay­ing for the tax cuts

The Se­nate tax bill would add $1.5 tril­lion to the na­tional debt over the next decade and trig­ger the “Pay As You Go” (paygo) rule, which re­quires across-the-board spend­ing cuts to a va­ri­ety of manda­tory pro­grams in­clud­ing Medi­care.

His­tor­i­cally black col­leges and univer­si­ties, tribal col­leges, child-care ser­vices and af­ford­able hous­ing could face fund­ing cuts, pol­icy an­a­lysts say.

Marc Mo­rial, pres­i­dent and chief ex­ec­u­tive of the Na­tional Ur­ban League, sug­gested that Pres­i­dent Trump’s bud­get blue­print ear­lier this year pro­vided a road map of those cuts.

Of course, work­ing- and mid­dle-class whites will also lose out in the GOP tax pro­pos­als.

Repub­li­can lead­ers have framed the tax plan as a boost for the mid­dle class. Ju­lia Law­less, spokes­woman for the Se­nate Fi­nance Com­mit­tee, said it’s un­fair to “cherry pick” spe­cific pro­vi­sions in an­a­lyz­ing the im­pact of the tax plan.

“When the tax over­haul plan is re­viewed in its en­tirety, it’s clear the plan is de­signed to lift mid­dle­and low-in­come Amer­i­cans across the coun­try,” Law­less said in a state­ment.

Mo­rial dis­agreed. “In re­al­ity, the mid­dle class is get­ting a bowl of cold grits and 7-Eleven cof­fee,” he said, “while the wealthy are not only get­ting filet mignon, but they are also get­ting lob­ster, caviar and Dom Pérignon.”

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