The tax due date is set for July 15, 2020 due to the outbreak of the corona virus. Calendar page with fiscal day … [+]
Let’s face it, preparing your taxes can be difficult, if not an arduous process, and for several years the IRS has advocated a free filing system to make it easier for Americans to complete their taxes. However, with the adoption of new tax legislation in 2019, the filing process is meant to stay complex, making it a victory for the tax preparation industry, while keeping blacks in a sunken tax place. More than 40% of African Americans earn less than $ 30,000 a year, putting them at an income disadvantage if taxes are not filed correctly.
The breakdown you need to know: Market Watch found that the tax code amplifies the disproportionate gap in racial wealth that already exists, based on how our economy works and how our society treats African Americans. Additionally, CultureBanx noted that local taxes tend to be flatter as they consume more money from low-income households as a proportion of their income.
Here’s the trick, most blacks can’t capitalize on some of the most lucrative areas of tax filing. For example, let’s take a look at the capital gains taxes that come into play in the sale, compared to the income that is taxed as you do so. Ordinary income, such as wages, tends to be taxed between 10% and 37%, depending on the amount. On the other hand, capital gains, as the product of the sale of shares, are only taxed between 0% and 20%.
This makes capital gains taxes a good deal for people who invest in the stock market. Unfortunately, only 36% of African Americans participate in any way in the stock market, compared to 60% of white Americans.
The tax trap: Looking at the Earned Income Tax Credit (EITC), which the researchers tout as a powerful anti-poverty measure, to help low-income households. The US Census found that in 2018 the EITC, combined with the child tax credit, kept 8.9 million people out of poverty. This sounds like a good idea until you realize that 20% of eligible families miss out on this opportunity, in part, due to the hassle of claiming it through the filing process, and the IRS takes a closer look at the statements claiming by the EITC.
Some of the richest and most diverse counties in the United States have normal audit rates. Going deeper into this, The Root verified that when filing taxes, the IRS tends to conduct a substantially higher percentage of audits in poor, disproportionately low-income areas, where African-American populations are high.
Taxation without real representation: Even if more black people could take advantage of the aforementioned tax saving opportunities, the 2019 First Taxpayer Law prohibits the IRS from creating a free online filing system. The tax industry giants made sure this was the case because in 2018 alone, H&R Block and Intuit, the parent company of Turbo Taxes, spent $ 6.6 million lobbying for tax legislation. The more complex the tax filing process becomes, the more revenue can be generated, and these companies generated $ 3.3 billion and $ 5.9 billion respectively in revenue during their 2018 fiscal year.
However, to appease the masses, these for-profit tax preparation services formed the Free File Alliance in an attempt to promote free tax filing for people with a certain level of income. However, this is not widely known as 70% of Americans are already eligible to file taxes for free through this program. Also, since the Free File program is operated by for-profit tax preparers who intentionally do not promote the free program, only 3% of eligible taxpayers actually use the service. If a free tax system were established, people of color could be relieved of this burden, possibly with considerable performance.
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