The Treasury Office of Tax Policy, in conjunction with the IRS Research, Applied Analytics, and Statistics Office, has two projects teed up to bring a racial equity focus to tax policy.
In a December 14 release coinciding with an appearance by Treasury Secretary Janet Yellen at the Freedman’s Bank Forum, a pair of top Treasury officials touted “path-breaking” results stemming from Treasury’s emphasis on racial equity and highlighted ongoing work by Treasury to glean insight on the demographic effects of tax policies.
“Treasury has been focused like a laser on racial equity since day 1,” Yellen said. “We’ve conducted a top-to-bottom review of what we do, both internally, in terms of our own hiring and promotion plans, and also all of the policies and programs that we implement.”
Treasury’s release, attributed to Assistant Secretary for Tax Policy Lily Batchelder and Deputy Secretary Wally Adeyemo, claims that the department's emphasis on racial equity contributed to an additional 26 million economic impact payments (EIPs) being distributed to low-income families that didn’t automatically receive their EIPs because they hadn’t filed federal tax returns in 2019 or 2020. Those families are disproportionately found in minority communities, and the additional payments were made after Treasury partnered with other federal agencies and community organizations, according to the release.
Treasury and the IRS are working on a project to determine whether and how eligible families received EIPs, as well as the “equity impacts” of a letter outreach campaign to raise awareness of eligibility for the payments, the release states.
Once that project concludes, Treasury plans to release, in 2022, statistics that include demographic data on who received the first and second rounds of EIPs authorized by Congress. In 2023 it expects to release additional data on the third round of EIPs.
The Office of Tax Policy is also developing a method for analyzing racial implications in tax policymaking and administration, despite the fact that the IRS doesn’t collect data on race or ethnicity and is forbidden from trying to collect it from other federal agencies, according to the release. To get around that, Treasury is working with other agencies to identify ways to impute race and ethnicity onto tax data and is considering various approaches for doing so.
If successful, the imputation model could be used for a variety of tax analysis purposes, including to analyze the equity effects of the three rounds of EIPs and the monthly advance child tax credit payments, which began earlier this year. “Together, the analyses could help shed light on how limitations in data might have affected the equitable distribution of payments and whether improvements could be made in their delivery,” the release states.
Batchelder and Adeyemo cautioned that the project is still in its preliminary stage, but they said Treasury intends to open its imputation model to the public once it’s completed so that the public can do its own research on the demographic effects of different tax provisions and shed “sunlight on the policy choices and trade-offs.”
The projects stem from an executive order signed in January by President Biden that targets inequality in federal agency actions. Titled “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,” the order directed the establishment of an equitable data working group to ensure that data sets gathered by the federal government take into account demographic variables like race or ethnicity. The working group comprises several individuals, one of whom is Batchelder.
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