California’s tax code favors the wealthy and blocks Californians of color and low-income households from economic opportunity – YubaNet
SACRAMENTO, April 8, 2021 – A new report from the California Budget & Policy Center shows that how California policymakers choose to collect and allocate resources — ongoing taxes and revenues — contributes to economic inequality for Californians of color and low-income households while providing many more benefits to wealthy individuals.
In a report in 5 facts — Promoting Racial Equity Through California Tax and Tax Policies – the Budget Center describes how a legacy of state and federal racist policies and practices, as well as aspects of the tax code, prevent people of color from having opportunities to generate income and wealth, while many state tax policies favor Californians with higher incomes and wealth. . These policies and practices range from residential segregation, to employment discrimination, to tax benefits for those who choose to “split” tax deductions, to deductions for mortgage interest and property taxes.
The report’s findings include:
- Black households make up only 3% of the wealthiest fifth of California households, even though they make up 6% of all California households.
- Latinx households make up 14% of the wealthiest fifth compared to 30% of all households.
- While American Indians and Pacific Islanders make up very small shares of California households, they make up even smaller shares of the top 20 percent.
- California is projected to lose more than $60 billion in state revenue in 2021-22 from personal income tax breaks, some of the largest of which provide the majority of benefits to high-income families.
- California’s four largest personal income tax deductions provide more than three-quarters of their benefits to families with incomes over $100,000, who are typically the top 20% of families, while n offering virtually no benefit to those with incomes below $20,000.
- Only 35% of black households, 44% of Latinx households, and 45% of Pacific Islander households are homeowners, compared to 60% of Asian households and 63% of white households.
“The racial, ethnic, and economic inequalities that have been made painfully clear by the COVID-19 pandemic and recession are nothing new for communities of color in California. The question now is what will California policymakers do in the face of growing racial and economic inequality and tax breaks that primarily benefit the already wealthy as they contemplate the state’s economic recovery? said Kayla Kitson, policy analyst at the Budget Center and author of the report.
The report also notes that policymakers have an opportunity to expand or create new tax benefits that benefit low-income Californians and help families build economic security, such as with the Earned Income Tax Credit. California (CalEITC) and the Young Child Tax Credit, which boost incomes for Californians with incomes below $30,000. About 3 in 4 CalEITC-eligible Californians are people of color, with about half of them Latinx Californians. However, the amount the state spends on these two credits is only about 2% of all state spending on personal tax relief.
Along the same lines, another Budget Center report released this week – Why are corporations not paying their fair share of taxes? — found that businesses are paying less than half the amount of state taxes, as a percentage of revenue, compared to four decades ago. This is largely due to decisions by policy makers to reduce corporate tax rates and expand tax breaks. These tax policy choices by state leaders have significant consequences for the economic well-being of the state and of Californians. For example, the California state budget would have received $13.3 billion in additional revenue in 2018 if businesses had paid the same share of their revenue in taxes that year as they did in 1981, plus that the state spends on University of California, California State University, and combined student aid.
Policymakers have the opportunity to generate continued revenue and invest in universal health care, making childcare, housing and higher education more affordable, and expanding community savings accounts. children or creating a “baby bond” program to help families save for their children’s future. , position the state for greater and fairer economic growth, and better prepare the state for the next crisis.
Read the full report here: https://calbudgetcenter.org/resources/promoting-racial-equity-through-californias-tax-and-revenue-policies/
The California Budget & Policy Center engages in independent tax and policy analysis and public education with the goal of improving public policies affecting the economic and social well-being of low- and middle-income Californians. Support for the budget center comes from foundation grants, subscriptions and individual contributions.