Congressional negotiators reached an agreement on a spending deal earlier this week, which was a mixed bag for women and families. Though Congress agreed to change some tax provisions during last-minute negotiations, the final spending package did not include improvements to two important tax benefits that would have helped women with low incomes and their families: the Earned Income Tax Credit (EITC) for workers not claiming children and the Child Tax Credit (CTC).
Refunds from tax credits like the EITC and CTC boost families’ incomes and help them pay bills, buy groceries, get their car repaired, or save for the future. The EITC and CTC keep the incomes of millions of people across the country from falling below the poverty line every year, and are especially important for women of color. So this was a missed opportunity to help hardworking women and their families.
This missed opportunity comes almost exactly two years after the enactment of the Trump tax law, which overwhelmingly benefited the rich and big corporations at the expense of women and families with low incomes.
The Trump tax law failed to address the EITC for workers not claiming children at all, even though the credit amount is so small that, under current law, workers with very low incomes can actually be taxed into poverty. And while the tax law made the Child Tax Credit (CTC) available to families making six figures, it left out the children who need it most. About 29 million children with at least one working parent will not receive the full amount of the full CTC increase because their families’ incomes are too low or they owe too little in taxes. And children of color are more likely to not receive the full CTC amount. In addition, about 1 million children were estimated to lose the Child Tax Credit because of new requirements imposed by the 2017 law. Overwhelmingly, these children are “Dreamers” who were brought to this country by their parents, and many of them are Latinx.
More broadly, two years after its enactment, the Trump tax law has exacerbated economic inequality, to the detriment of women and people of color. While the language of the tax law may be neutral on its face, it has disadvantaged women and people of color in practice. For example, the Trump tax law contains numerous provisions that are designed to benefit the rich, including lowering the top income tax rates and slashing taxes on wealthy estates. But families of color and women supporting families on their own are underrepresented among the higher-income households estimated to receive the most benefit from the tax law and overrepresented in the lower-income households receiving little or no benefit from the law. This means that the Trump tax law perpetuates and exacerbates racial and gender inequality.
Here’s another example: the Trump tax law created a new 20 percent deduction for “pass through” income for partnerships and small businesses among others. This “pass through deduction” is heavily tilted toward the wealthy. Experts have noted that women-owned small businesses are unlikely to benefit from this deduction. Moreover, the deduction creates incentives for employers to hire independent contractors rather than employees (or misclassify employees as contractors), which could weaken legal protections for women workers – including protections against workplace race or gender discrimination and harassment.
In addition to leaving low- and moderate-income families out of the increases to the CTC (and leaving out the EITC altogether), the Trump tax law has not delivered the benefits to women and families that the administration and its Republican congressional champions promised. In fact, by 2027, it’s estimated that almost 100 million households will pay more in taxes. Moreover, although the Trump administration and congressional Republicans asserted that corporate tax cuts would end up boosting worker pay, neither pay increases nor new corporate investments have materialized in the two years since the Trump law was enacted. To add insult to injury, the administration has proposed cuts to public programs that support women and families, saying that increased deficits – caused in no small part by the 2017 tax law – require reduced spending. Our analysis of the White House’s Fiscal Year 2020 budget proposal found that the first year of budget outlays included $62 billion in cuts to major programs disproportionately serving women and families.
Here’s the bottom line: the tax code is a powerful force in our economy. It collects revenue, which in turn supports public investments in our shared national priorities. What’s more, it rewards and incentivizes behavior by individuals, families, businesses, and government systems. The rules it sets can mitigate or exacerbate inequality. In short, the tax code reflects and enshrines a vision of society. And it’s clear that it’s time for a new vision.
We need a tax code that works for women, people of color, and low- and moderate-income families – fostering an economy that works for all of us, not just the wealthy few. While the administration and Republicans in Congress decided not to correct two of the Trump tax law’s most glaring omissions as part of the recent spending deal, we’ll be working hard next year and beyond to fulfill the tax code’s potential for increasing equity – because we can’t afford not to.