Tax Alliance for Economic Mobility
The primary purpose of the U.S. tax system is to generate public revenue; but it also serves as a vehicle to advance public policy goals, such as encouraging household savings and investment in order to increase families’ long-term financial security and strengthen the national economy.
The tax code includes provisions to encourage homeownership, savings for higher education and retirement and other wealth-building goals through tax credits, deductions, exclusions and preferential rates. But these tax policies – collectively known as “tax expenditures” – reduce government revenues and disproportionately benefit wealthier households relative to lower-income families and families of color. In fact, research shows that of the more than half of the $1 trillion in annual tax expenditures ($540 billion) supporting households to save and build wealth, the top 1 percent of households received more benefits than the bottom 80 percent combined and that 70 percent of tax savings from mortgage interest, property tax deductions, and employer-based retirement savings goes to the top 20 percent of households.
The Great Recession resulted in an enormous loss of household wealth. Lower-income households and households of color in particular are still struggling to get back on their feet; yet they are unable to access federal tax subsidies designed to encourage savings and investment. For example, more than two out of three American households (including 99% of households in the bottom income quintile) do not itemize, so they are unable to take advantage of tax deductions such as the home mortgage interest deduction and deductions for higher education; and fewer than 20% of households, including only one in ten African-American or Latino households, are able to benefit from preferential tax rates for dividends and capital gains.
Deliberations about reforming the federal tax code, including discussions about the cost and benefits of various tax expenditures, are underway in Congress. These discussions provide an opportunity for advocates to call for a more inclusive, progressive and equitable tax code, one that significantly expands savings and investment incentives for low- and moderate-income households and households of color.
The Tax Alliance for Economic Mobility (TAEM), started by the Asset Funders Network (AFN) and now led by CFED and PolicyLink, convenes asset-building advocates, tax reform experts, researchers, representatives of organizations of color and grassroots constituents to identify near- and longer-term policy priorities to expand savings and investment opportunities for lower-income households through reform of the U.S. tax code. The Alliance includes a coalition of more than 35 national organizations who have agreed on shared principles and policy priorities and are working to educate and engage their networks about why equitable, inclusive and progressive tax reform is crucial to building the long-term security of families, communities and the national economy.