By lifting up families at the bottom through tax credits and taxing affluent households more, Democrats can help narrow the racial wealth gap.

But their latest plan may not be ambitious enough, according to experts, after they scaled back some of President Joe Biden’s initial proposals.

“It’s baby steps,” Carl Davis, research director at the Institute on Taxation and Economic Policy, told Yahoo Money. “When you put them all together, they add up to a more meaningful package that would narrow racial wealth inequality. But the changes are more modest than they should be.”

House Democrats proposed increasing the top income tax rate and the long-term capital gains rate, among other proposals, which hit high-income households that are disproportionately white.

The expansion of the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC), among other credits, would reach a larger share of the Hispanic and Black population, helping to narrow the wealth gap between those two groups and white Americans, according to Davis.

“Broadly, the approach is right,” Davis said. “Biden's plan is unquestionably more ambitious and it would be more powerful.”

Expanding the child tax credit ‘would be a transformational change’

The proposal that would have the biggest impact on narrowing the racial wealth gap would be the extension of the expanded CTC through 2025, which is part of the House Ways and Means Committee plan. Right now, the expansion is scheduled to expire after this tax year.

“There's no doubt that that would be a transformational change for a lot of families,” Davis said. “The amount of income support that would be provided through that is just much larger than what's being considered for the other credits.”

Nearly half of Black children (48%) and almost half of Hispanic children (46%) live in families that were previously considered by federal tax law to be too poor to qualify for the full credit, according to estimates by ITEP. Under the Democrats’ proposal, the full credit would be extended to allow those families to continue getting the credit. Additionally, the larger credit amount would continue.

Additionally, The American Rescue Plan made the EITC fully refundable — in turn reaching more Black and Hispanic families — and extended the credit to workers without children at home.

“That's a benefit geared toward low-wage workers, [and] unfortunately, with the racial disparities in this country, people of color are more likely to be low-wage workers,” Davis said. “As long as that disparity continues, the EITC will be helpful in boosting the financial security of people of color.”