Key Takeaways:
– Trump’s Tax Cuts and Jobs Act will end on December 31, 2024, calling for fresh financial negotiations in 2025.
– The 2017 tax cuts were the most extensive revisions to the Internal Revenue Code after Reagan’s administration, changing from corporate tax arrangements to individual tax deductions.
– However, these tax cuts favored corporations and high-net-worth individuals over middle and low-income earners, specifically impacting disadvantaged Black Americans.
– The expiry date of these tax cuts presents a rare opportunity for the coming government to reassess and address income disparities, aiming for a fairer tax system.
Need for a Deeper Look at America’s Tax System
In 2017, former President Donald Trump signed the Tax Cuts and Jobs Act into law, marking one of the most sweeping overhauls of the country’s tax system ever implemented. One of the most notable results of these cuts was that corporations, partnerships, and the wealthy benefited much more than the middle class, exacerbating the wide income and wealth gap in America.
Disproportionate Impact on Middle-Class and Black Americans
Despite initial promises of economic relief for the middle class, more than 80% of the financial benefits from these tax cuts went to corporations, partnerships, and high-net-worth individuals. This move shot up the U.S. deficit by a whopping $1.9 trillion from 2018 to 2028, according to estimates from the Congressional Budget Office. On top of all this, the tax breaks aimed at the middle class only served to make a tiny dent in their overall taxes.
Nonetheless, the adverse effects of these tax changes were felt more acutely among Black American taxpayers. They ended up paying higher taxes even compared to their white counterparts with similar income and other socioeconomic factors. These disparities originated from systemic racism, legacies from slavery, and biases in home ownership rates and access to home ownership benefits that tax systems tend to favor.
Widening the Wealth Gap
Racial discrimination also plays a huge role in the discrepancy in the mortgage industry. Middle-class Black Americans often face more challenges getting a mortgage than their lower-income white counterparts. And when granted mortgages, Black borrowers are often charged higher rates. This unfair structure only worked to widen the wealth gap under the Trump tax regime.
Repercussions on Healthcare Access
Moreover, revoking the individual mandate that required all Americans to have basic health insurance triggered a dramatic decrease in the number of insured people, mostly amongst the low-income population. Strikingly, the decline in Black Americans’ coverage due to the tax changes was notably higher than that of white Americans.
Inadequate Consideration of Inflation Adjustments
Another significant critique of Trump’s tax reform was the way it changed the method of calculating inflation adjustments. The transition from the consumer price index for urban consumers to the chained consumer price index led to fewer inflation adjustments. These changes disproportionately impacted Black taxpayers living in low-income neighborhoods due to their limited access to budget-friendly options.
Possible Remediation Through New Law Revisions
The expiry of Trump’s tax cuts at the end of 2024 provides an ideal opportunity for a long-overdue overhaul of these problematic policy grey areas. The responsibility falls on the next GOP-led Congress to address the damaging disparities made more prominent by these recent tax changes. The goal is to establish a tax system that caters to all Americans’ needs—core principles of fairness that should, indeed, underlie the American Dream.