Tax policy does not occur in a vacuum – inequities are caused by racial and capitalistic underpinnings and are influenced by societal biases

Revenue Adequacy and Sustainability Are Racial Equity Issues Unlike the federal government, in most instances states and localities cannot operate on a deficit. This means that most revenue needed to provide essential services to residents must be derived from taxes and fees. An equitable tax code must adequately fund necessary services and must have long-term sustainability. The most vital function of any tax code is to provide adequate funding for the public services and institutions needed for broadly shared economic prosperity. Far too often, communities of color are asked to bear the brunt of regressive tax systems both by contributing a larger share of their income in taxes and by enduring cuts to programs when overall funding levels fall short. Tax policy choices do not occur in a vacuum. They reflect society’s biases and values. When a local government raises revenues via fines and fees and disproportionately targets underserved communities with violations, it can send lower-income people into a spiral of debt from mounting fees and penalties, and in some instances, it unjustly criminalizes people who cannot afford to pay. Similarly, when a state or local government shifts taxes away from those most able to pay (e.g., by reducing personal income taxes) to those least able to pay, it increases inequity and threatens tax adequacy. Perhaps the most well-known example of racial biases and inadequacy in tax policy choices is California’s Proposition 13. Passed by popular vote in 1978, the measure prevented property assessments and taxes from keeping pace with rising home values under the guise of protecting middle-income homeowners. This insulated established white homeowners from increased taxation and shifted the burden onto new homeowners who were more likely to be Hispanic and Black. It also ravaged the state’s property tax base, stripped available funding for public schools and dropped California’s school rankings from “First to Worst.”[73] Passage of the measure was a dramatic shift from the previous consensus among people and the business community that taxes should be able to keep pace with the cost of funding vital public investments, from water projects to public education. The state, once majority white, was growing increasingly diverse. A vocal Black and Hispanic population began demanding equity in education, housing, job opportunities and other areas of life. Growing white resentment and campaign rhetoric centered on so-called taxpayers and takers contributed to the outcome, which had lasting effects on California communities’ ability to raise revenue. Nearly three decades later, tax cuts and spending cuts damaged low-income communities and communities of color in Kansas. In 2011, Gov. Sam Brownback’s overhaul of state government included massive income tax cuts that primarily benefitted the highest-earning Kansans. The policy changes also resulted in cuts to public benefits program spending and a restructuring of school financing formulas in a way that primarily harmed poorer districts. While the Brownback income tax cuts primarily benefitted high-income white households, the accompanying increase to sales taxes and elimination of targeted low-income tax credits resulted in a tax increase for the lowest-earning 40 percent of Kansas taxpayers. This hurt many white families—the state is over 85 percent white and the vast majority of poor Kansans are white. But Black and Hispanic Kansans are overrepresented among low earners, meaning most Black and Hispanic Kansans faced a tax increase from the so-called Brownback tax cuts.[74] These low-income households of color were also hurt by reduced per pupil spending in public schools and a failure to expand Medicaid.[75] These examples from different states and time periods illustrate the importance of a tax structure that not only collects revenue in an equitable way, but also collects an adequate and sustainable amount of revenue. Advancing racial and economic equity through tax policy requires as much.