The Earned Income Tax Credit (EITC) is considered one of the most effective programs for reducing child poverty and promoting economic stability among low-wage families.
But there is a suite of benefits that is needed to support workers in their daily lives, like paid leave and minimum wage, that rely on a progressive tax system. So how do we support workers now while linking total compensation to tax policy?
Rachel Isacoff, Manager for the Equity & Economic Opportunity initiative at The Rockefeller Foundation, sat down with Dr. Darrick Hamilton, Director of The New School’s Institute on Race, Power and Political Economy, and Rebecca Dixon, Executive Director of the National Employment Law Project (NELP) to discuss how tax systems could be made more equitable for workers.
Darrick, starting with the big picture, can you explain the role of tax policy in the social safety net and the linkages between tax policy and pro-worker benefits?
Too often we think of the tax code as strictly intended for revenue collection. But of course, the tax code does a lot more than that. It should be aligned with the fiscal and fiduciary responsibilities of government, which would include economic inclusion, civic engagement, and social equity. It is perhaps our biggest fiscal tool.
We clearly have different rates in which we tax capital gains versus how we tax wages.
Well, that’s a choice. Similarly, when we think about refundable tax credits versus tax deductions – the implications on a fiscal budget are the same, yet the values we hold in the way we view them as different need to change. We need a new narrative and a new understanding.
And, even the way we talk about the tax code – my tax dollars – it is all reaped in language of deservedness and undeservedness – who deserves a tax benefit. And I dare say there’s a clear racial and class element in the discourse when we talk about who’s deserving and who’s not deserving.
That resonates also with how we talk about corporate tax breaks. We call them tax breaks as opposed to paying a fair share. How can linking unfair wages to taxes highlight the relationship to poor worker benefits and hold corporations accountable in the public eye?
That question is spot on because it fits into notions of deservedness and undeservedness, but also the engines of growth in our economy. We have this lexicon that somehow what’s good for the corporate sector will trickle down to all of us and lift all boats.
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