Rally for fair taxes.
Happy Wednesday!
We had a LOT of questions about taxes after last week's newsletter on tax inequity. And I get it – taxes are still confusing to me, honestly. It's hard enough to know how to file them effectively, let alone how to dismantle its racist foundation. Today, Jami highlights the tax amendment on the ballot in Illinois this election and uses it as a benchmark for how we can change state taxes when we have a chance.
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ps – tonight Kamala Harris will face Mike Pence in the VP Debate. Consider how the "angry Black woman" trope we unpacked in a previous newsletter may come into play in the news Thursday.
pps – I had to remove the sharing assets from these emails, as they're making many go to spam. Instead, snag them from our Facebook or Instagram accounts.
TAKE ACTION
If you are in Illinois, vote for the Fair Tax (also known as the Graduated Income Tax Amendment)
Use the Who Pays? analysis from the Institute of Taxation and Policy to find out how inequitable your state’s tax policies are. Who benefits from the policies? Who is harmed?
If you are financially comfortable, check out Resource Generation to learn about how and why you could redistribute some of that wealth to others. Uprooted & Rising provides a Mutual Aid Plug In Guide, an excellent step-by-step worksheet.
GET EDUCATED
By Jami Nakamura Lin (she/her)
Like many people, the extent of my knowledge about taxes has to do with inputting my information into TurboTax or H&R Block’s free tax software and either being pleasantly surprised at my tax refund or despairing about how much I owe. Our convoluted tax system in America means that we outsource the preparation to professionals—or, increasingly, software—and the extent of our interest extends to how the rules affect us individually, rather than seeing the bigger picture.
This year, though, a graduated income tax amendment (known as the Fair Tax) is on the ballot here in Illinois. Right now, our state’s constitution requires us to have a flat tax rate, in which everyone is taxed the same percentage. The proposed amendment would repeal that requirement, opening the door for a tax rate that changed based on your income. While effects can vary depending on a lot of individual factors, in general, if you belong to the 97% of Illinoisans that make less than $250,000, your taxes will decrease (Chicago Sun-Times). (You can check how it will affect you personally at the Illinois Fair Tax Calculator.)
I know most of you don’t live in Illinois, and you might be asking: why does this matter to me? You might not be able to vote for this specific resolution, but sooner or later, you’ll have to vote on tax-related changes in your area, and taxes greatly affect wealth inequality. While Americans are now much more wealth inequality in general, we sometimes overlook how taxes contribute to that disparity. According to leading economists, tax policy is one of the four primary reasons that between 1980 and 2007, the 1% most wealthy people in America doubled their total income share (Journal of Economic Perspectives). More recent data shows that even after the Great Recession, income concentration has continued to rise at the top (Center on Budget and Policy Priorities).
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Nearly every state government, including local governments, collects more taxes from poor families than from high-income families relative to their incomes, and more taxes are generally collected from middle-income families than high-income families.Palma Joy Strand and Nicholas A. Mirkay in Racialized Tax Inequity: Wealth, Racism, And The U.S. System of Taxation
Our federal tax policies are geared towards letting the already wealthy accumulate more wealth and pass it down to their children. But even those of us who are not millionaires benefit disproportionately. Many people who consider themselves middle-class benefit from tax-preferred 401k pension plans, tax-deferred 529 college savings accounts, and mortgage deductions. Such policies and problems might look like a divide amongst the rich and the poor—issues of class, rather than race. But in America, “investigators of inequality… have documented that the rich tend to be White and the poor tend to be people of color” (Northwestern Journal of Law & Social Policy).
Compared to white Americans, a far smaller percentage of Black and Brown people own their homes or possess such accounts. They do not benefit from such tax breaks. Meanwhile, income disparities amongst Black and white people have increased since 1979. On average, white households are ten times richer than Black households and eight times richer than Latinx ones (Northwestern Journal of Law & Social Policy). A shocking 2016 study from the Federal Reserve and Duke University shows that in Boston, the median wealth of a white family was almost $250,000, while the median wealth of a non-immigrant Black American family was $8 (Federal Reserve of Boston). Eight dollars.
This is why a progressive income tax matters. In Illinois, the average income of the top 1% of families is over 65 times larger than the average income of the bottom 99% (Illinois Economic and Policy Institute). Yet the poorest 20% in Illinois pay 14.4% of their income in taxes, while the wealthiest 1% pays 7.4% (Shriver Center on Policy and Law). Illinois and other states with flat taxes are part of the Terrible Ten, “states that tax their poorest residents — those in the bottom 20 percent of the income scale — at rates up to six times higher than the wealthy” (Institute on Taxation and Economic Policy).
So if you cheer when you get your tax refund, make sure to also remember that taxes don’t affect everyone equally. Our tax policies are designed to benefit the rich. A progressive income tax is only a small reform in a system that needs an entire haul, but it is a tangible, if limited, way to fight against wealth inequality. And, as always, while fighting for policy change, we can also directly make change on the ground. If you are able, commit to redistributing some of your income or wealth every month.
KEY TAKEAWAYS
On average, the 20% of Americans with the lowest incomes pay a state and local tax rate 1.5x higher than the 1% of Americans with the highest incomes (Institute on Taxation and Economic Policy).
Tax inequity is one of the driving factors in wealth inequality in America (Journal of Economic Perspectives).
White households are, on average, 10x wealthier than Black households and 8x wealthier than Latinx ones (Northwestern Journal of Law & Social Policy).
In Illinois, voting for the Fair Tax will support tax equity.
RELATED ISSUES
9/28/2020 | Fight racial tax inequity.
9/30/2020 | Close the racial wealth gap.
6/11/2020 | Support black-owned businesses.
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