U.S. Taxes Are Still A Sunken Place For African Americans

It’s tax day folks and the process of preparing them can be difficult if not arduous, especially for more than 14 million taxpayers who ​​paid for tax prep software that they could have gotten for free. The Treasury Inspector General for Tax Administration found roughly a billion dollars in revenue for TurboTax maker Intuit

INTU
, H&R Block

HRB
and other tax software companies, according to ProPublica. Over 40% of Black Americans make less than $40,000 per year, putting them at an income disadvantage if taxes are not filed correctly, as tax policy adds insult to injury by magnifying the financial toll, and keeping Black people in a sunken tax place.

The Breakdown You Need To Know:

Black taxpayers also face tax rules that, some observers say, keep the gap between Black and white wealth wide. “The tax code amplifies those disproportionate gaps that already exist, based on the way our economy works and the way our society treats African Americans,” said Wilton Hyman to MarketWatch. CultureBanx noted that this year, consumers whose adjusted gross income is $73,000 or less can use products in the IRS Free File Program.

Local taxes tend to be flatter, eating up more money from lower-earning households as a proportion of their income. For example, ordinary income, like a wage, is taxed between 10% and 37% depending on the amount. Capital gains, such as stock sale proceeds, are taxed between 0% and 20%, with some exceptions. Lower rates are a good deal for those playing the markets, and white stock market investors are more common than their Black counterparts. In fact, 64% of white participants in a Gallup Poll said they owned stock, compared to 42% of Black and 28% of Hispanic people.

Stuck In The Tax Rabbit Hole:

As we continue to spiral down the Black-tax rabbit hole, CBS reported that Census Bureau data shows White married couples are more likely to have a stay-at-home spouse and get a tax cut. Whereas in Black married couples, both partners are more likely to be wage earners, and therefore pay higher taxes. Differences in how married couples are taxed, versus singles, is another way in which Black families end up disadvantaged, according to Dorothy A. Brown, author of “The Whiteness of Wealth: How the Tax System Impoverishes Black Americans — and How We Can Fix It.”

Additionally, it’s important to note that people who claim the Earned Income Tax Credit (EITC) that helps low- and moderate-income households, are more likely to get audited. Black and Latinx taxpayers combined are 40% of all those who are eligible for the credit, according to the Brookings Institution.

Situational Awareness:

Back in March The Federal Trade Commission took action against Intuit, the maker of the popular TurboTax tax filing software, by issuing an administrative complaint against the company for deceiving consumers with bogus advertisements pitching “free” tax filing that millions of consumers could not use. In 2020, for example, approximately two-thirds of tax filers could not use TurboTax’s free product.