- Paul Constant is a writer at Civic Ventures and cohost of the "Pitchfork Economics" podcast.
- In a recent episode, he spoke with Emory University tax law professor Dorothy A. Brown about the US tax system.
- Emory says the current tax system actively advantages white Americans while disadvantaging Black Americans.
It is an indisputable fact that the tax system in the United States offers many advantages to Americans with money. And it is also an indisputable fact that on the whole white Americans are wealthier than other races: while only about 60% of the population is white, white Americans hold about 86% of the nation's wealth.
So with those two facts in mind, we can already conclude that the American tax code benefits white Americans over Black Americans, creating racist outcomes. But on the latest episode of "Pitchfork Economics," Emory University tax law professor Dorothy A. Brown explains how profound the discrepancies between Black and white taxpayers really are under the current tax code.
In her book "The Whiteness of Wealth: How the Tax System Impoverishes Black Americans – And How We Can Fix It," Brown argued that "when Black and white Americans engage in the same activity – whether it's getting married, whether it's buying a home, paying for college, or trying to build wealth – our tax system advantages how white Americans engage in the activity and at the same time disadvantages how Black Americans engage in the activity."
"The conventional wisdom is when you get married, you get a tax cut," Brown offered as an example. But that tax cut only benefits families where one spouse serves as a primary wage-earner. The tax bill is even higher when both spouses work and earn the exact same amount. Married couples who both earn around $50,000 a year, for instance, pay a much higher tax bill than married couples where one spouse stays home with the kids and the other spouse earns $100,000 annually.
Brown said, "what I discovered is white married couples were more likely to be in a single-wage-earner household and eligible for the tax cut, but Black married couples, regardless of income, were more likely to be in what I call marriage-penalty households, and therefore paying higher taxes."
The distinction here is important: If the tax code happened to deliver outcomes that hurt Black American families, our solutions would be better-focused on improving outcomes. But Brown said the joint return, to continue with our example, "came into existence in 1948, when there was a higher percentage of Black married couples with wives working outside the home. So was it benign neglect, or was it just intentional benefits in favor of white taxpayers? I think it's the latter, which of course, necessitates a discriminatory impact on the part of Black taxpayers."
In this example, the tax code was established to advantage white wealth, which means the code itself must be rewritten to remove its inherent racist inequities.
Brown loves to offer her expertise to Black families looking to minimize the tax code's impact on them. "I recommend Black Americans recognize that they have to take a defensive posture," she said.
She warns young Black home-buyers that because the market traditionally undervalues and overtaxes Black and non-white neighborhoods, "you can be house-poor if you're living in a white neighborhood, but not in a racially diverse or Black neighborhood. Do not take home equity loans if you're living in a racially diverse or Black neighborhood," she said.
She also advises Black Americans to save as much as they can and "put it into your retirement account and max out, or start a 529 child savings account for your child or a niece or nephew."
But Black Americans shouldn't have to work twice as hard to manage their finances in order to enjoy a similar tax rate as their white counterparts. If Brown had the final say on how to fix the tax code, her solution is elegant: "First, I would tax all income the same," she said. "Income from stock would be taxed at the same rate structure as income from wages."
"And I would have very few, if any, exclusions," Brown continued. "There'd be one deduction for what I call a living allowance, which meant if you didn't earn enough from your job to have a sustainable lifestyle, the Federal government would write you a check for the difference. And if you earned more than that, you would pay taxes at the progressive tax rate. So there'd be pretty much no loopholes."
A tax code that accurately assesses profit and living expenses, regardless of race, is a tax code that would benefit many people currently left behind: Poor Americans, married professional couples, and, yes, Black Americans. That's because equity isn't a zero-sum game - subgroups of people don't have to be held back in order for others to succeed. When Black Americans aren't kept from being able to participate fully in the economy, it's better for all of us.