Reshaping the Tax System to Support Family Wellbeing

Summary

A fairer, more equitable tax system would invest in families, value their contributions, and provide meaningful opportunities for them to pursue what is best for their children. Unfortunately, the tax system places an unfair burden on families with lower incomes and worsens income and racial inequities. If we reimagine tax policies with a child and family-first mindset, the tax system can be a powerful force for collective good.

Key Findings

Creating Tax Policy for the Common Good

Regressive policies tax people with lower incomes at higher rates than the wealthy, which perpetuates income inequality. For example, families with low incomes pay seven times more of their earnings in sales taxes than wealthy families. Several states have adopted more progressive approaches. The top 10 states with progressive tax codes offer a refundable Earned Income Tax Credit (EITC), which can offset the impacts of regressive policies and foster a fairer, more inclusive tax system for everyone.

Advancing Racial Equity for Economic Inclusion and Families

Tax credits such as the EITC and the Child Tax Credit (CTC) have been shown to reduce wealth inequalities and racial disparities, but current policies fall short of realizing their full potential. While 74% of white families can take full advantage of the CTC, only 48% of Black families and 51% of Latine families can, showing how policies designed to help families can further exacerbate racial income gaps.

Shifting Power for Family Wellbeing

Our nation’s resources flow in inequitable ways—and it works that way by choice. The tax system has been shaped to benefit individual wealth and power, rather than developing collective wealth that builds strong economic systems. Designing ways to shift more power to families could create a tax system where everyone has the opportunity to thrive.

Conclusion

To build a tax system that truly supports all families, no matter their background, we must invest in tax policies that benefit all families, especially those with the lowest incomes. It is possible to create a fairer, more just tax system that advances us to a future where all families have the resources they need to raise healthy, thriving children.