Tax Cut

An analysis of the $1.5 trillion tax cut that President Trump signed into law last year shows that white Americans benefit significantly more than African Americans and Latinos.

Based on an economic model built by the Institute on Taxation and Economic Policy, a liberal think tank, and released in a joint report with Prosperity Now, a nonprofit that helps low-income Americans achieve financial stability, these findings are the first to break down the tax cut by its impact on different races, according to a New York Times article.

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The report found that white Americans earn roughly 77 percent of the total income in the United States, and they are getting nearly 80 percent of the benefits of the individual and business tax cuts from the new law. Conversely, African Americans received about 5 percent of the benefits, despite earning 6 percent of the nation’s income and Latinos received about 7 percent, although their share of all income is 8 percent, according to the Times.

This year, whites are expected to collectively receive $218 billion in tax cuts as a result of the new law, compared with a combined $32 billion for blacks and Latinos, the Times reported.

“Even if you’re a successful black or Latino household in the top 1 percent, you’ve achieved the American dream, you’ve hit it out of the park,” David Newville, director of federal policy at Prosperity Now, told the Times, “you’re still not getting the same returns from this bill as a white household.”

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The analysis was conducted by examining historical tax data on Americans by income group. The result was that those that benefited the most were the nation’s top 20 percent of earners. The model combined tax data with race and ethnicity data obtained from the Federal Reserve’s Survey of Consumer Finances.

The analysis illustrates the financial advantages that white people have long held in this country. Whites earn more on average than black or Latino Americans, and are significantly more likely to be among the top income earners in the country. This means they already had a head start and were better positioned to gain from the tax cuts than low- and middle-income Americans.

In the analysis, Asian-Americans stood to receive the highest average cut – even greater than white Americans – however, the study found that whites will still fare better than any racial group because tax cuts affect individual taxpayers differently. It all depends on how they earn their money.

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A higher percentage of white taxpayers owned so-called “pass through” businesses, such as limited liability corporations, and pay taxes on their profits through the individual income tax code, according to the Times article. The new law features a 20 percent deduction for pass through income, with some limitations.