To some people, tax season is a blessing. For many others, it comes with stressing. Refunds are noticeably less than those from previous years due to many tax laws reverting back to pre-pandemic times. According to CBS News, the IRS warned in November 2022 that refunds would likely be smaller in 2023.
We know that the expanded Child Tax Credit and Earned Income Tax Credit from the American Rescue Plan that was a lifesaver for many families and workers during the pandemic is no longer available to some of the lowest income communities. As a result, many families may have had a balance due shock this year. Another really important tax change is the reporting of money earned by freelancers who used payment apps like Venmo or PayPal. Due to the confusion and backlash of this change, the IRS announced that it would delay the reporting requirements until the 2024 tax filing season. So come this time next year, folks who run small businesses can expect that added stress. These changes have affected those who rely on tax season to aid in things like home repairs, or to pay down debt or save for emergencies, and things seem to be getting worse.
Lucky for me, the first time I’ve ever filed my taxes was during the pandemic because I was a fully independent, college graduate. I experienced very long delays in receiving my refund, but my return was much greater for the past two years compared to this year. 2020 was the first year that I actually had enough income to report and I never realized how much of my check went towards taxes.
Despite anyone who works needing to pay taxes, they are still shrouded in mystery. Young people don’t learn what exactly gets taken out of their checks and why, so it’s definitely a shock when they see their take home pay. Filing taxes is also confusing for many, especially when it comes to what they can expect as a refund. And if you, like me, got a higher tax return in 2021 or 2022, do not use those numbers as a barometer for your tax return this year.
Low and moderate income workers, many of whom are Black, can expect significantly lower return amounts this year. Some people end up using their tax returns to relieve debt or work towards short term financial stability, which may not work in their favor this year because of anticipated delays on the part of the IRS in getting people their tax returns and the fact that some tax safety nets will be smaller. The Earned Income Tax Credit (EITC) was more generous to people without kids during the 2021 tax filing season. But now it is going back to its pre-pandemic amounts. In 2021, they received a credit up to $1,500; this year, it’s cut back by more than half to around $560. Thankfully, low income workers with children who qualify for the ETIC may still see a little bit of relief this year because it accounts for annual inflation. This could provide a little bit of cushion that may not exist otherwise.
On the other hand, billionaires and major corporations never have to stress when it comes to Tax Day. Because there are huge tax breaks for capital gains, so many billionaires hardly pay any of the income taxes the rest of us pay, making it easier for them to accumulate wealth.
A 2019 report found that the 400 richest American families owned more wealth than all of the Black households in America combined. The median Black family owned less than $3,600, which is 2% of the wealth a median white family owned. Wealth for Black families has been in decline since the 1980s, and by 2082, it will be at $0. In that same time, the top 0.1% of wealthy families in this country have seen their wealth almost triple.
Senator Elizabeth Warren’s Ultra-Millionaire Tax, a two-cent tax on those that have a net worth of $50 million or more would create a revenue of $3.75 trillion over 10 years. In 2022, President Biden included the Billionaires’ Minimum Income Tax in his budget plan. The tax would ensure that billionaires would pay income tax on at least 20% of their incomes. Estimates from the Treasury Department showed that the tax would raise $361 billion over 10 years. While it wouldn’t get us to wealth equity, it would ensure that the wealthy would at least be held accountable to contributing to the public services we all use, just like lower-earning Americans are.
Now that the government is rolling back much of the pandemic relief, many Black Americans find themselves at an all too familiar place: Fighting the uphill battle of surviving. The safety nets that kept them afloat for the past two years and bridged some economic gaps are being pulled out from under them with no time or opportunity to catch up. And unless we make some changes, for them, Tax Day will always be a time for stress.