What People of Color Should Know About Tax Cut and Deficit Reduction Proposals
Dr. Maya Rockeymoore is president and CEO of Global Policy Solutions, a social change strategy firm in Washington, D.C., and the Center for Global Policy Solutions, a social change nonprofit dedicated to making policy work for people and their environments. She is also the co-chair of the Commission to Modernize Social Security. A regular guest on radio and television shows, Dr. Rockeymoore has appeared on NPR, CNN, Black Entertainment Television, ABC World News Tonight, Fox News, Al Jazeera and C-SPAN.
A lot has been said about the proposed tax giveaway to the wealthiest Americans and the austerity measures recommended by President Obama’s deficit commission. However, an analysis of the impact that both proposals would have on black and brown Americans has been missing from the conversation.
U.S. Census Bureau projections show that the nation is expected to become majority-minority by the year 2042. And, although Census figures indicate that people of color will comprise about 42 percent of the elderly population by 2050, they are likely to become a majority of older adults by the year 2070.
What has not been made clear to date is that the nation’s changing demographics means that today’s children of color will predominantly be on the hook for paying for the profligate spending and poorly designed policies of the past 12 years. And that proposals to rein in the deficit by cutting social programs, particularly Social Security, would be put into place just as these children reach maturity. This generational cost shift should be of serious concern to Latinos and African, Asian, and Native Americans for they have benefitted least from the expenditures that caused the deficits and their children are not well positioned to shoulder their costs in the future.
Federal Reserve data from 2007 shows that for every dollar owned by the average white family, the average Latino family owns 12 cents and the average African-American family owns only ten cents. Given the disproportionate impact of the recession on black and Latino families, this racial wealth disparity is expected to widen in the future, thus further undercutting the economic security of children of the recession generation.
Since our nation’s leaders have decided to shift the costs of today’s fiscal decisions to our children, then we owe it to our children to evaluate the various tax proposals in terms of the value they bring to the economy and to families in communities hardest hit by the recession. Experts agree that tax breaks for the wealthiest individuals and estates do nothing to create jobs or otherwise stimulate the economy. So, it should be clear that these tax giveaways are not only highly inefficient they are a boondoggle for the rich at the expense of those with modest means.
Furthermore, as has been explained by others, the package’s payroll tax “holiday” provision is a booby trap for all middle and working class Americans but especially for people of color. This proposal to offer Americans a two percent reduction in their payroll taxes for the next two years is seemingly innocuous until you understand that the payroll tax is the only source of dedicated revenue for Social Security. Therefore, a “holiday” from paying this tax would undercut the program’s finances while strengthening the arguments of critics who cite Social Security’s long-term financial challenges as a reason for cutting or eliminating the program. Any weakening of Social Security would devastate communities of color who are heavily reliant on Social Security’s retirement, disability, and survivor’s benefits.
We must also be wary of the deficit reduction commission’s proposal to “fix” Social Security in part by increasing the early and regular retirement ages for this proposal also has the effect of shifting the cost burden onto people of color in a way that should be considered discriminatory in its scope and application. The Government Accountability Office issued a report that underscores how raising the early retirement age would create financial hardships for people, particularly African Americans and Hispanics, who cannot continue to work due to poor health or physically demanding work.
There are additional negative consequences associated with this approach. As I have argued elsewhere, an increase in the retirement age is a steep benefit cut and it represents a transfer of Social Security wealth from those with shorter life expectancies–a group comprised disproportionately of the lower income, blue collar workers, and people of color–to those with higher life expectancies–a group comprised overwhelmingly of whites, white-collar workers, and wealthier Americans. Ironically, the nation’s shifting demographics are not likely to greatly change this equation since children of color are disproportionately affected by the childhood obesity epidemic which, many experts agree, is likely to cause them to live shorter and sicker lives than their parents.
To be sure, advocates for the commission proposals and the tax cuts would say that I have unfairly maligned their proposals. Deficit commission members, for example, may cite their proposed hardship exemption for people who cannot work past the retirement age as proof that they have accommodated the needs of vulnerable populations. If the hardship exemption is anything like qualifying for disability, it would likely discriminate against those without lawyers, the poor and people of color and it would become a way to control program costs instead of providing cover for those most in need. It also fails to address the racial transfer of wealth issue.
Similarly, those in favor of the tax cut package as negotiated by the president and the Senate would point to the provisions for modest income households, such as the unemployment insurance extension, refundable tax credit for the low-income, college affordability credit, and refundable child tax credit as proof that they too have accommodated the vulnerable. However, these important provisions are a relatively smaller part of a total package that is heavily tilted towards helping privileged Americans.
It is no secret that people of color have often received the short end of the stick when it comes to U.S. fiscal policies and practices. But the cumulative one-two punch of the proposed tax cuts and looming deficit reductions, along with their expected generational impact on those who can least afford to shoulder the costs, amounts to a form of fiscal racism that is without parallel in the modern era.
Dr. Maya Rockeymoore is President and CEO of Global Policy Solutions, a social change strategy firm based in Washington, DC and co-editor of Strengthening Communities: Social Insurance in a Diverse America.