Tax Policy to Reduce Racial Retirement Wealth Inequality

37 Pages Posted: 31 Oct 2023 Last revised: 16 Jan 2024

See all articles by Carl Davis

Carl Davis

Institute on Taxation and Economic Policy (ITEP)

Brakeyshia Samms

Institute on Taxation and Economic Policy (ITEP)

Date Written: September 1, 2023

Abstract

Historic and ongoing discrimination have created stark racial disparities in the US, and the racial
retirement wealth gap is one such example. This chapter examines inequality in retirement
wealth across race and ethnic groups and discusses various aspects of federal and state tax law
with an eye toward their impact on this inequality. It advances a few guiding principles that can
aid in the construction of more racially equitable tax laws, including the benefits of credits over
deductions, the need for meaningful limits on the use of tax-subsidized retirement accounts, and
a reminder that the core function of tax policy is to raise revenue, not subsidize private behavior.
We also provide evidence that retirement savings exemptions predominately favor upper-income
White households. Tax reform has immense potential to reduce racial retirement wealth
inequality through robust funding of social security, reorienting retirement savings incentives
toward moderate-income families, taxing retirement income streams across the states, and
ensuring appropriate taxation of real estate wealth in retirement.

Keywords: Tax policy, retirement plans, savers tax credit, inequality, government expenditures

JEL Classification: H24, H22, H55, J32

Suggested Citation

Davis, Carl and Samms, Brakeyshia, Tax Policy to Reduce Racial Retirement Wealth Inequality (September 1, 2023). Wharton Pension Research Council Working Paper No. 2023-24, Available at SSRN: https://ssrn.com/abstract=4617703 or http://dx.doi.org/10.2139/ssrn.4617703

Carl Davis (Contact Author)

Institute on Taxation and Economic Policy (ITEP) ( email )

1311 L Street, NW Suite 400
Washington, DC 20005
United States

Brakeyshia Samms

Institute on Taxation and Economic Policy (ITEP)

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