How Will Black and Latino People Fare Under Trump's Tax Plan? It Doesn't Look Good

Donald Trump
President Donald Trump. Mark Wilson/Getty Images

White Americans can expect major privileges under the Republican tax reform plan — ones that blacks and Latinos will mostly miss.

Tax reform could be crafted to create inclusive growth, but the proposed GOP plan will only exacerbate the racial wealth gap and lift inequality growth, according to economists and tax lawyers. Families of color will soon make up a majority of the American population, yet they continue to fall behind whites in building wealth. White family wealth was seven times greater than black family wealth and five times greater than Hispanic family wealth in 2016.

"Tax law is generally created with white taxpayers in mind and this is another example of that," said Dorothy Brown, an Emory University law professor who focuses on tax policy by race and class. "This plan privileges the way whites experience America."

This is how the tax plan will be rigged by race:

It favors Americans with compounded wealth.

The Republican plan favors Americans who generate income from wealth they or their families already have. Currently, inherited wealth of up to $5,430,000 can be passed tax-free to a surviving spouse, and then to children. The new plan would completely eliminate the estate tax, meaning that any amount of money could be passed down to future generations tax-free. These changes to the estate tax will cost an estimated $200 billion, and would largely exclude blacks and Hispanics. Because of the systematic disenfranchisement of non-white Americans, whites have had much more time to earn money and let it compound.

"The GOP tax plan is nothing more than a massive transfer of wealth to the richest Americans at the expense of working families and underserved communities," said New York Congresswoman Yvette D. Clarke.

It cuts Medicaid, Obamacare subsidies, and social benefits.

Obamacare's expansion of Medicaid and subsidized coverage lowered the uninsured rate of non-elderly African Americans from nearly 19 percent to just under 12 percent, but the GOP tax plan would largely eliminate these benefits. The Senate would not only end subsidies for Obamacare, but also cut $5.3 trillion from Medicaid over ten years to pay for tax cuts. The House plan would also end the medical expense deduction which allows Americans to deduct qualified medical expenses that exceed 10% of their income for the year. These changes would penalize lower-class Americans who underinsured.

Brown also worries of a "second punch" to the non-white community, "after the bill is passed Republicans will counter rising deficits by cutting back on social programs," she said.

The U.S. poverty rate dropped to 12.7 percent in 2016 but the poverty rate for black Americans is 22 percent, and as a result they rely on social assistance programs more than white Americans.

It favors white business owners and shareholders.

Tax advantages for businesses make up the vast majority of the Senate tax plan, at 60 percent of the total cost. Only 17 percent of businesses in America are minority-owned and large tax breaks for corporations don't typically create more jobs or raise wages, according to Vanessa Williamson of the non-partisan Brookings Institute.

Changes to corporate tax rates will benefit shareholders, but only one-third of black and Hispanics own stock, compared to two-thirds of whites. "Wealth disparity between white and nonwhite Americans will be compounded by this legislation. I think that tax policy in America, like most policy, has historically been intended to advantage white people." said Williamson.

Black and Hispanic Americans don't own as many homes as whites.

Tax policy favors homeowners, and the rate of homeownership among white Americans is more than 30 percent higher than black Americans. Black and Hispanic households are about twice as likely as white households to rent their homes, yet there are no tax breaks for renters. The House bill would also eliminate a type of tax-exempt bond that funds about half of all affordable housing development in the United States.

A new report by The Institute for Policy Studies found that "without a serious change in course, the country is heading towards a racial and economic apartheid state," and that "if the racial wealth divide is left unaddressed and is not exacerbated further over the next eight years, median Black household wealth is on a path to hit zero by 2053."