Proposals: Amend tax codes to address economic inequality

By David Pendered

The search for tools to address economic injustices has led two Atlanta-based researchers to propose changes to the federal and state tax codes.

Dorothy Brown

“The racial wealth gap will never be eliminated without significant tax reform,” Emory University law professor and author Dorothy Brown said the start of her remarks in a webinar hosted by Atlanta Fed President Raphael Bostic.

“[T]ax policy decisions at the state level have played a unique role in helping to enrich white Georgians and corporate interests, while placing an unequal burden on Black Georgians and people of color,” Georgia Budget and Policy Institute senior tax and budget policy analyst Danny Kanso writes in the introduction to his new report.

The two reports are independent of one another and were released separately.

Brown spoke Oct. 20 as a featured panelist in the ninth edition of the Federal Reserve’s series, “Racism and the Economy.” Kanso presented his report Oct. 8 during GBPI’s fall policy forum.

Brown said her recommendations for reform are detailed in her recently released book, “The Whiteness of Wealth: How the Tax System Impoverishes Black Americans and How We Can Fix It.” Penguin Random House Publishing released the book March 23.

Danny Kanso

One proposal is a refundable wealth tax credit. The proposed program would be based on household wealth, not income – thereby providing a disproportionate share of aid to Black households, which are widely documented to have significantly fewer financial assets than white households.

Brown gave a brief description of the proposal.

“A refundable wealth tax credit is different from the earned income tax credit in that it is measured by household wealth, whereas the earned income tax credit is a function of income,” Brown said. “While the earned income tax credit is extremely complicated, a wealth tax credit would be extremely easy to implement.”

Kanso cited Georgia’s sales tax among his recommended changes to promote tax equity, which he addresses in the report, “Reimagining Revenue: How Georgia’s Tax Code Contributes to Racial and Economic Inequality.”

Sales taxes, such as those for prepared meals at a Brookhaven restaurant, have a disproportiontate impact on lower income households, according to GBPI. (Photo by David Pendered)

The inequities stem in part from the state’s decision to not impose sales taxes on most services. Whites tend to consume more services than Blacks, such as legal, medical and accounting services. The sales tax on goods affects Blacks and whites equally, but is not equitable because it takes a greater proportion of household income from Black households than white households.

Georgians in the bottom 20 percent of household income pay 6.8 percent of their total income in sales tax. In the top 20 percent of household income, sales taxes represent 1 percent of their total income, Kanso reports.

Kanso observed the state projects sales tax collections at $6.6 billion in the fiscal year that ends June 30, 2022. An estimated $8.9 billion in potential sales tax collections are exempt because of the lack of a sales tax on most services.

Bostic noted the relevance of history and role of institutions in the current economic situation that disadvantages some and benefits others. In his closing remarks, Bostic noted:

• “Institutions matter and details of institutions matter. As we think about how we move forward, we are going to have to get into the details. Small things can make big differences.”