In July of this year, when the total unemployment rate in Latin America was 12.9 percent and the unemployment rate in Latin America was 14 percent – both significantly higher than the simultaneous white unemployment rate of 9.2 percent – President Donald Trump noted at a round table with Hispanic leaders that its the administration had “done really well” with Hispanics. However, in nearly four years in office, President Trump has done nothing to fill the gaps in the Latin American labor market. In fact, his government’s flagship legislation is tax legislation that left many Latino families out and exacerbated the persistent wealth gaps. Here are four ways Trump’s 2017 tax bill has left the Latino community behind.
1. The Tax Act of 2017 widens the gap between Latino and whites
Overall, the 2017 tax law – known as the Tax Cuts and Jobs Act (TCJA) – worsened an already massive wealth gap between white and Latin American households. In 2016, the middle white household had a net worth of $ 171,000, including durable goods. The middle Latino household had net worth just over $ 20,000, less than a fifth of the middle white household. But instead of helping bridge the gap between Latino and white, the TCJA likely widened it. In 2018, white taxpayers now received nearly 80 percent of all the benefits of the TCJA, while only 6.7 percent went to Latino taxpayers, according to a study by the Institute for Taxes, Economic Policy, and Wealth. The average tax cut for white households was twice that for Latino households. In fact, the Tax Cut and Employment Act has given white households more benefits in the top 1 percent of the income distribution than anyone else in the bottom 60 percent, regardless of race combined.
2. The 2017 Tax Act left many Latino children behind
In 2018, 46 percent of Latino households had children under the age of 18, compared with just a quarter of white households. But the changes that the TCJA made to help families with children largely left out Latino households. The TCJA doubled the Child Tax Credit (CTC) from $ 1,000 per child under 17 to $ 2,000 and increased the maximum refundable portion of the tax credit from $ 1,000 to $ 1,400. While the law significantly expanded the eligibility of wealthier households to access the loan, increasing the credit-expiring income level to $ 400,000, most low-income families and children received partial or no benefit . Because not all tax credits are refundable, lowest-income families who are disproportionately colored families may not qualify for the full CTC. As a result, 50 percent of Hispanic children were left behind.
The 2017 Tax Act also completely excluded a large portion of the Latino workforce from the CTC: those who claim children with Individual Tax Identification Numbers (ITINs) instead of Social Security Numbers (SSNs). ITINs are used for tax filing purposes by individuals who are not eligible for a Social Security number – including many taxable undocumented workers and other immigrants in the United States. By denying child tax credits to low-income families whose children have an ITIN instead of an SSN, around 1 million children, mostly undocumented children, were excluded in the 2017 law. While this is not a perfect picture of inequality, the undocumented population is overwhelmingly Latino.
3. The massive corporate tax cuts in the Tax Act of 2017 will primarily benefit white households
The TCJA also lowered the tax rate for large companies from 35 percent to 21 percent. Unlike most individual tax rules slated to expire in 2025, the corporate tax cuts are permanent. This means that in the long run, an increasingly larger portion of the benefits of the Tax Act 2017 will flow to owners of company shares. Since non-Hispanic white households are more likely to own stocks, both directly and through retirement accounts, these changes have little benefit for many Latino households, while they bring big returns to affluent – and predominantly white – households.
4. The Tax Act of 2017 favors existing assets over work
Decades of discrimination, occupational segregation, and systemic oppression have created a large wealth gap between white and Latin American households, and the TCJA has made several changes that both cemented and widened that gap. One of the worst provisions in the bill has significantly weakened the tax on predominantly white land and helped maintain dynastic intergenerational wealth transfers. Even before the 2017 law, inheritance tax fell only on the richest 0.2 percent of estates, meaning almost every American except the 5,500 richest heirs was exempt. The TCJA increased the exemption level from around $ 11 million to $ 22 million for married couples. This reduced the number of wealthy heirs to pay and granted a $ 4.5 million tax cut to each of the richest goods.
The vast majority of this tax cut goes to wealthy white heirs. White families are much more likely to receive inheritances than Hispanic households, according to the 2019 Consumer Finance Survey. In 2019, nearly 30 percent of white households received an inheritance, gift, or other family support, compared with just 7.2 percent of Hispanic households. For those who received an inheritance, Hispanic households received, on average, less than white households. The median conditional inheritance for white households was 70 percent higher than the average inheritance for Hispanic households in 2019.
Since inheritance tax only applies to the largest inheritances, the benefits of a cut would only go to those with enough wealth to meet the TCJA exemption threshold. According to a Center for American Progress analysis of the 2016 Consumer Finance Survey, 9 out of 10 households in the US with net worth above the estate tax threshold before 2017 were white.
Conclusion
Taken together, the changes within tax legislation that Trump put into law in 2017 have helped increase inequality and cut taxes significantly for the rich, while leaving Latinos behind on the short end of the staff regardless of income. The tax bill also cost roughly $ 2 trillion in revenue that could have been used for education, health care, or other priorities that promote common prosperity. Future changes in tax legislation should address these shortcomings by making targeted changes that improve income and opportunities for low- and middle-income families. ensure businesses and Ultrawealthy pay their fair share of taxes; and address persistent racial inequalities.
Galen Hendricks is an economic policy researcher at the Center for American Progress. Ryan Zamarripa is the Center’s deputy director of economic policy.