Discrimination Via Tax Code

The United States tax code causes and perpetuates discrimination via economic inequities between race and gender. The US tax code primarily influences people of color, non-traditional families, and women negatively. This impact has historical roots and recent updates that perpetuate economic disparity, furthering the gap between socioeconomic statuses. Though the tax code does not directly benefit one race or gender specifically over another, history has shown discrimination through public policies that helped develop and determine household tax liability, including income, wealth, and marital status. This impact has a far greater reach on people of color, non-traditional families, and women. The following are some of the ways that the tax system disproportionately benefits white families over families of color.

Gendered assumptions of familial status have become deeply internalized in the tax plan, impacting non-traditional family status. The traditional concept of a family unit is typically a heterosexual married couple with children where the male serves as the breadwinner. Naturally, this presumes that an increase in men’s income will benefit everyone in the household (Crawford, p. 229). This is evidenced in the joint return that expects one partner to be the primary provider while the other partner stays home (traditionally taking care of the home and the children.) However, these impacts can be challenging for non-traditional families such as multi-generational homes, non-married couples, non-cisgender or heteronormative homes, or blended families that have children dividing their time between homes.

Another relevant discrepancy is the difference between Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). The EITC was initially designed to give tax relief to working-poor families, while the CTC was designed to provide tax relief for middle-income families. The EITC works to lift many families out of poverty and targets lower-income families. However, EITC is challenging to qualify for, requires taxpayers to work to obtain the credit, has received national scrutiny and is often referred to as a “welfare program”, and has a ceiling on benefits regardless of family size. Additionally, EITC requires eligible single and unmarried parents to meet precertification requirements to verify the relationship to the child before they can receive their credit (Crawford, p. 256).

In contrast, the CTC is targeted at middle-class families, does not have any work requirements or a ceiling on benefits, is not perceived as welfare but rather as “tax relief”, and is easy to apply for (Crawford, p. 223). The CTC program also increases benefits with increasing family size as families have a “reduced ability to pay taxes” as the family size grows. Conversely, the EITC places a cap on benefits to discourage larger family size. The contrast of these programs was highlighted in 2003 when tax benefits were denied to 12,000,000 children to low-income households while middle-class families could easily get their credit (Crawford, p. 256–257).

One area for improvement is the definition of “family.” In varying areas of tax code, there is a multitude of definitions of family. However, many of these definitions benefit “traditional” families with two married parents (Crawford, p. 245). Tax rules should adopt more meanings of family to increase the scope of services and prevent exclusion to those that should qualify for a benefit. These definitions could comprehensively include multi-generational households, non-married couples, non-cisgender or heteronormative homes, blended families that have children dividing their time between homes, foster or non-adoptive, or families without children. It would be beneficial to look at the complexity of family definition beyond the individual, traditional family members. By narrowing the meaning too much, we are again harming non-traditional families. Redefining and allowing credits for various other family styles, splitting benefits between households if in transition, etc., could significantly impact the number of people able to benefit from a system they have already paid into.

Although the federal tax laws are not the cause of racism, sexism, or discrimination based on familial status, many rules exacerbate these societal issues. The tax system creating regulations based on conservative culture’s “traditional family values” seems to serve white, non-Hispanic American families. Simultaneously, everyone else is forced to squeeze into that box to get their fair treatment. Federal tax laws should be explored and challenged to prevent a more significant economic divide between women, non-traditional family status, and people of color. Tax laws should begin to center race, gender, and family status in their analysis in any new or changing tax reform acts.

Crawford, B. J. (2009). Critical tax theory : An introduction. ProQuest Ebook Central.

Section 121.-Exclusion of Gain from Sale of Principal Residence 26 CFR 1.121–1: Exclusion of Gain from Sale or Exchange of a Principal Residence.

Toder, Eric J., and Karen E. Smith. “Do Low-Income Workers Benefit from 401(K) Plans?” SSRN Electronic Journal, 2011, 10.2139/ssrn.1937795.

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