High-income Asian American families pay higher taxes than their white counterparts
By Carl Samson
Asian American households remain significantly understudied in tax policy research, according to experts at the Urban-Brookings Tax Policy Center (TPC). New data reveals that these households pay higher average tax rates than white households due to differences in income sources, highlighting the need for more nuanced research and policy considerations.
- Income and tax rate disparities: Asian American households, particularly those in the top 20% of the income distribution, face higher average tax rates than their white counterparts, according to the TPC. This disparity reportedly arises as Asian American households earn a larger portion of their income from fully taxed labor earnings, whereas white households are more likely to benefit from tax-favored income sources such as capital gains, business income and imputed rent on owner-occupied housing. The progressive nature of the federal income tax system means that these differences in income composition lead to higher tax burdens for wealthier Asian Americans.
- Diverse economic experiences and stereotype challenges: The economic experiences of Asian Americans are far from monolithic. While a significant portion of these households are in the top 20% of earners, a substantial number also fall into the lower 20% to 40% of the income distribution, challenging the “model minority” stereotype. Additionally, factors such as higher labor force participation among Asian American women, a younger age distribution, lower rates of homeownership and unique family structures further complicate the group’s economic landscape. The higher occurrence of marriage penalties and the lower likelihood of receiving tax credits — such as the earned income tax credit (EITC) and child tax credit (CTC) — among low-income Asian American households indicate systemic challenges that need to be addressed.
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