Tuesday, March 21, 2023
Phyllis Taite (Oklahoma City) presents Welfare v Wealthfare: The Illusion of Equity in Tax Policy at Georgetown today as part of its Tax Law and Public Finance Workshop hosted by Emily Satterthwaite and Dayanand Manoli:
Tax laws and policies may be perceived as race-neutral because race data is not used to determine tax liability. Similarly, the rate structure may be perceived as progressive because tax rates increase as income increases. Nonetheless, history has demonstrated that tax laws and policies are biased against race and class and the tax system is not effectively progressive. This article explores a few ways that perceptions of tax policy do not match the reality of tax laws and policy.
This article will discuss how transfer taxes were implemented permanently to raise revenue and combat wealth concentration. Instead, the federal transfer tax system is no longer effective for either purpose, though both are essential to effectively addressing vast economic inequalities. Through various tax acts, tax policy has subsidized the wealthy, people who need no financial assistance, rather than combat wealth concentration.
Several tax changes have reinforced the stronghold of the wealthy by subsidizing four of the pillars of wealth mobility: inherited wealth, education, homeownership, and acquisition of appreciating assets. By using tax policy to subsidize wealth transfers, education, homeownership, and appreciating assets the government has supported wealthfare, and the scales of equality are unbalanced in perpetuity unless drastic measures are undertaken. To reverse some of the effects of wealthfare, the government must invest in the households most damaged by past policies and tax policy is an integral part of the process.
Part I addresses the illusion of tax neutrality and the consequences of inequality. Part II describes and analyzes transfer tax's regressive effects, including an analysis of the impact tax policy has on wealth mobility. Part III provides proposals to address economic inequalities with targeted wealth mobility programs using tax policy by making homeownership more affordable, retirement more accessible and tax relief for lower income families.