Within a week in mid-May, there was a mass shooting in Buffalo, a stock-market selloff on Wall Street and a heated primary election in Pennsylvania. In the midst of it all, the Government Accountability Office released a report with an unsettling conclusion.
The government watchdog agency told Congress that it couldn’t figure out if the massive pandemic stimulus bill — the Coronavirus Aid, Relief and Economic Security Act — reached everyone it was supposed to help, or if it mostly benefited white, male taxpayers, for example. There’s no way to accurately track the payments by race or sex, wrote Jessica Lucas-Judy, director of strategic issues at GAO.
“Our analysis is limited by a lack of tax and demographic data,” she added, pointing out that current laws bar the IRS from asking people their race or sex in most situations, or from getting that data from other federal agencies.
She recommended that Congress change the law to make it easier for the IRS to obtain demographic data. So far, no one has proposed such a bill.
When Congress passed the CARES Act in March 2020, it became the largest stimulus bill in U.S. history. The law funneled $1.8 trillion to businesses and individuals at a time of widespread layoffs and business closures. That included sending $1,200 to most people earning less than six figures, plus $500 per child.
While the relief bill was credited for helping lift the economy out of a recession, economists later discovered that the tax changes mostly benefited millionaires. Other research suggests that millions of poor Americans may not have received the money because they’re not required to file tax returns and may have struggled to apply for the payments online. Some may not have known that they needed to apply for it.
Congress had asked GAO to study the law’s impact on different racial and gender groups. The agency’s conclusion: That’s nearly impossible.
Demographic data is urgent for researchers to understand how tax policies affect people of different races, said Elaine Maag, a senior fellow at the Urban-Brookings Tax Policy Center.
“The tax code doesn’t say, ‘I am only going to give child tax credits to white people.’ But if it’s designed in a way that Black families are less likely to get the credit, then that’s a problem,” she said. Using survey data, Maag’s research suggests that Black and Latino families were far less likely to receive the extra child tax credit from a later pandemic stimulus bill — a loss of up to $3,600 per child. But without hard data, the true impact is unclear.
It’s no secret that the U.S. tax code indirectly benefits wealthier, white taxpayers. This is something that researchers have long argued. For example, the federal government’s previous policy of refusing to back mortgages in Black neighborhoods, known as “redlining,” lowered property values in those neighborhoods over generations. As a result, homes in majority-white neighborhoods increased in value at a higher rate. The higher property values have translated into larger tax breaks on mortgage interest payments.
But the racial disparities from many other tax rules, including those in the pandemic relief bills, remain uncertain. One of the people in charge of crafting tax policies for the Biden administration admitted as much during a June 2021 House hearing.
“Until we have that data — we have many anecdotes I guess we can talk about — but having that data would really allow for a high level of sophisticated discussion of what the impacts are and allow them to be taken into account in developing policies going forward,” said Mark Mazur, then deputy assistant secretary for tax policy at the U.S. Department of Treasury.
Sen. Ron Wyden, D-Oregon, chairman of the Senate Finance Committee, had asked GAO to study potential inequality in the CARES Act payments. He said in a statement that he agrees with the report’s recommendation that Congress should make it easier for federal agencies, such as the Census Bureau, to share demographic data with the IRS and promised to make that happen. He did not mention how or when.
Wyden’s office did not respond to a request for comment from the Center for Public Integrity.
Lucas-Judy, of the GAO, told Public Integrity that she’s not aware of any efforts by Congress to change the law.
Too often, reports like these are ignored, said Maag, of the Tax Policy Center.
“I think, unless it becomes a priority of the public and lawmakers, then we won’t see any change,” she said.
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