March 25, 2021
An important new book from Professor Dorothy Brown at Emory University offers a timely look at the federal tax code through the lens of racial equity. The Whiteness of Wealth: How the Tax System Impoverishes Black Americans—And How Can We Fix It uses a mix of data, legal scholarship, interviews, and personal stories to tear down the myth that our tax system is neutral with respect to race. Federal tax laws favoring investment income, homeownership, higher education, retirement savings, and marriage systematically advantage white families at the expense of Black families and other people of color. Reforming those policies could advance racial equity, and the Biden administration’s infrastructure and economic recovery legislation that will soon be taken up by Congress represents a chance to begin doing just that.
Tax subsidies flowing to high-income earners tend to offer outsized benefits to white families because policy advantage and privilege have ensured that the nation’s top earners are disproportionately white. But income is just the tip of the iceberg. A full understanding of how tax law intersects with racial disparities requires looking not just at the amount of income that shows up on a family’s tax return in any given year, but at their overall wealth – meaning the value of their home, investments, and all the other assets they have accumulated during their lives.
As Brown shows, the federal income tax has preferential treatment of wealth woven throughout. It shows up in the lower tax rates afforded to capital gains income. It shows up in the mortgage interest deduction, property tax deduction, and exclusion of gains on home sales afforded to homeowners. And it shows up in tax-free inheritances and gifts passed down through the generations in families with higher levels of wealth.
Even holding income constant, white families are more likely than Black families to benefit from these provisions because years of racism and discrimination across all segments of society – the housing market, labor market, financial industry, educational systems, criminal justice, and other areas – have prevented people of color from building wealth on the same level as white families.
Two households with the same annual income can be treated differently by the tax code. The one with more wealth, more income from wealth, and more ways to generate wealth – who is more likely to be white – ends up paying less tax.
Relative to a Black family, a white family of the same income level is more likely to own their home, have a higher-valued home that is appreciating more rapidly, access a tax-preferred retirement savings plan through their work, own more financial assets overall, and
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