Planet Money: The Planet Money Indicator: NPR
SYLVIE DOUGLIS, BYLINE: NPR.
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ADRIEN MA, HOST:
Ever since she was little, Dorothy Brown dreamed of one day becoming a lawyer.
DOROTHY BROWN: I wanted to be a civil rights lawyer like Thurgood Marshall, who was one of my heroes.
STACEY VANEK SMITH, HOST:
But, you know, sometimes life makes us reconsider our hopes and dreams. And Dorothy said, the moment she got to college…
BROWN: I decided I wanted to be a lawyer, but I didn’t want it to have anything to do with race. I decided it would be too painful for me to face racism every day as a black woman and then have to go to work and face the substantive law that dealt with racism.
MA: So she went in search of a new dream and found it, of all, in a course in tax accounting.
BROWN: And that’s when the light bulb went out. Oh, my God, I love this. I want to do tax law because the only color that matters is green.
MA: The IRS has loads of rules and regulations governing who pays what and how much, and race never comes into the equation — or so Dorothy thought.
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MA: This is THE PLANET MONEY INDICATOR. I am Adrian Ma.
VANEK SMITH: And I’m Stacey Vanek Smith. It’s tax season. And even if you find yourself wading through pages and pages of mind-numbing forms, you won’t be asked to tick a box declaring your race or ethnicity. But Dorothy, who teaches tax law at Emory University, has come to believe that race and taxation are closely linked. She wrote a book about it called “The Whiteness of Wealth”. And when we return, Dorothy explains how taxes and race intersect.
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MA: It took Dorothy years to even consider studying the relationship between taxes and race. She had already gone to law school, got a special degree in tax law, became a tax lawyer. And then she read an article by one of her mentors, a law professor named Jerome Culp.
BROWN: And in his article, he said, how do you know there’s no race and tax issue if you’re not looking? And I thought, what? – race and tax? So I picked up the phone, and I called him, and I said, Jerome, I’m going to do something about race and taxes. I have no idea what it’s gonna be, but I’m gonna do something. And he said, good for you.
VANEK SMITH: So Dorothy hangs up and starts looking for data.
BROWN: And that’s when I found out that the IRS doesn’t publish statistics by race. And it was like, what am I gonna (ph) do?
MA: Yeah. So, as Dorothy discovered, the IRS is not like, say, the US Census or the Departments of Justice, Education or Housing. These agencies need to collect race and ethnicity information because it helps them enforce civil rights laws, and that just wasn’t the IRS’ mandate. So she had to get creative, pulling together whatever she could find from other race and tax agencies and researchers. And eventually, a pattern began to emerge.
BROWN: So what my research has shown, provision after provision after provision, is that these tax subsidies were made with white taxpayers in mind and not black taxpayers.
VANEK SMITH: A great example of that is joint tax filing for married couples. This layout dates back nearly a century to a wealthy white Seattle couple named Charlotte and Henry Seaborn. Charlotte was a stay-at-home wife. Henry was an executive in a shipbuilding company. And in the 1920s, they were looking for a way to reduce their tax bill.
BROWN: What he decided to do – what he and his tax advisers – let’s be clear – decided to do is transfer half of his income to Charlotte. If he were able to transfer half of his income to his wife, then the tax rates each of them would pay would be significantly lower than if he were taxed on all of it.
MA: It’s just something they decided to do, and it wasn’t…
BROWN: There was no legal precedent for that. So the IRS gets it. He said, you can’t do that. And they go to court and eventually go to the Supreme Court. And the Supreme Court said, you know, you can do it. So we get the joint return because Henry and Charlotte decided they didn’t want to pay that much tax.
VANEK SMITH: I mean, who doesn’t want to pay less tax, right? It is probably a universal human law. But here’s the thing – filing joint income tax essentially amounts to a marriage bonus, but primarily for couples like the Seaborns where one spouse brings in virtually all of the income. And generally speaking, that’s less likely to be the situation for black couples than it is for white couples.
MA: And one of the main reasons for that is that black people have historically faced discrimination in the labor market. In fact, studies show that they still often do. So it’s more often the case for black couples that both partners have to work to make ends meet. And even for high-income households, Dorothy’s data shows that black couples are more likely than whites to be dual-income households. So ultimately that means black couples are generally less likely to be able to take advantage of the marriage bonus.
VANEK SMITH: Dorothy saw that reflected in her own parents’ situation. Her father was a plumber and her mother was a nurse. And even though they filed their taxes jointly, Dorothy couldn’t understand why their tax bill wasn’t lower.
BROWN: And it clicked. That’s why my parents pay so much tax – because my parents earned almost identical incomes.
MA: And in her research, Dorothy found other ways the tax code seemed to ignore people like her parents. Take employer pension plans – you know, things like 403(b), 401(k)s. These allow employees to save money for retirement tax-free. But because of past and present discrimination, black people are less likely to have the types of jobs that offer those plans.
BROWN: And even when they’re working in jobs that qualify for these retirement accounts, they don’t benefit. And why could that be? – because research shows, for example, that black university graduates are more likely to send money to their parents, grandparents, extended family, while white university graduates are more likely to receive money in the form of gifts and inheritances from their parents and grandparents. It’s not that black people aren’t frugal. It’s that we have more financial responsibilities because we have parents who came under Jim Crow who, like my father, was denied entry into the plumbers union because he was black. And it wasn’t until he joined the plumbers’ union that he got a job with tax-free retirement benefits.
VANEK SMITH: Systemic racism in housing, education and employment has made it harder for generations of black families to accumulate wealth. And that means less money to invest in stocks or buy a house, both of which come with tax advantages.
MA: And just to be clear – Dorothy is not saying that the tax laws were necessarily designed to discriminate. She says those rules were written mostly by wealthy white dudes at a time when discrimination was rampant, and so the tax code helps preserve the effects of that historic discrimination.
VANEK SMITH: Knowing that, what needs to be done to make the system fairer? To start, Dorothy says, the IRS should collect data on race and ethnicity. This would help the public understand the impact of the tax code on different groups.
MA: In addition to that, Dorothy pleads for a simplification of the rules. She says, get rid of provisions that have disproportionately benefited wealthy whites. After all, why should single-earner married couples be taxed any differently than two-earner households?
VANEK SMITH: Why should landlords get a break and not tenants?
MA: Why should income from investments and estates be taxed differently from wages? Dorothy says they shouldn’t be. And of course – it would of course be huge changes to the tax code that would probably get pushed back a lot. But Dorothy says they would also benefit the majority of taxpayers of all races. Plus, she says, if she could be convinced it would be a step toward racial justice, maybe others could be, too.
BROWN: I learned that race had nothing to do with taxation. So, you know, my eyes opened. The scales fell off. And now the little girl has won, hasn’t she? The little girl in me who wanted to be a civil rights lawyer won at the end of the day. It just took me a few decades to get there.
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MA: If you want to go deeper into this topic, check out Dorothy Brown’s book, “The Whiteness of Wealth.” I have read it and can only recommend it. This episode was produced by Corey Bridges. It has been verified by Taylor Washington. Viet Le is our main producer. Our editor is Kate Concannon. And THE INDICATOR is an NPR production.
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