WEBVTT - Tax Code’s Race Bias Runs Deep 0:00:00.160 --> 0:00:04.200 This is Bloomberg Business Week with Carol Masser and Bloomberg 0:00:04.280 --> 0:00:08.560 Quick Takes Tim Stinovic on Bloomberg Radio. So we promised 0:00:08.600 --> 0:00:10.800 you we would bring you this next guest. We talked 0:00:10.800 --> 0:00:12.360 about her a few weeks ago when she was the 0:00:12.400 --> 0:00:15.160 subject of a Bloomberg Business Week cover story for her 0:00:15.160 --> 0:00:18.720 work and career as a law professor documenting racism in 0:00:18.760 --> 0:00:21.680 a tax system that is supposed to be color blind. 0:00:22.040 --> 0:00:24.079 I am honored to bring in Dorothy Brown. She's professor 0:00:24.079 --> 0:00:27.640 of Emory University School of Law, author of The Whiteness 0:00:27.640 --> 0:00:32.120 of Wealth, How the tax system impoverishes impoverishes Black Americans, 0:00:32.159 --> 0:00:34.599 and how we can fix it. She joins us on 0:00:34.640 --> 0:00:38.239 the phone in Atlanta. Dorothy, Professor Brown, nice to have 0:00:38.320 --> 0:00:43.080 you here on Bloomberg. Welcome. Thanks so much for having me, Carol. 0:00:43.200 --> 0:00:45.400 So listen, UM, let's get right to it, because you 0:00:45.520 --> 0:00:48.120 this story that was the cover of Bloomberg Business Week 0:00:48.159 --> 0:00:52.320 magazine really did dig into the work that you have done. Um, 0:00:52.400 --> 0:00:54.400 and for those of you though that may have missed it, 0:00:54.560 --> 0:00:57.160 can you talk a little bit about how you got 0:00:57.200 --> 0:00:59.320 to this book, what you found out when it came 0:00:59.400 --> 0:01:04.720 to US tax codes. Yes, so I kind of fell 0:01:04.760 --> 0:01:07.400 into this. I didn't. I went into tax law thinking 0:01:07.400 --> 0:01:09.800 it had nothing to do with race. Deliberately went in 0:01:09.840 --> 0:01:11.839 a tax law thinking it had nothing to do with race. 0:01:12.360 --> 0:01:16.280 And I'm doing my parents tax return and I'm the 0:01:16.360 --> 0:01:18.759 numbers are not adding up. They seem to be paying 0:01:18.800 --> 0:01:21.440 too much in taxes, but I can't figure out why. 0:01:21.600 --> 0:01:23.480 And I have a graduate degree in tax law. I 0:01:23.480 --> 0:01:26.240 know what I'm doing, but something didn't add up. Well. 0:01:26.280 --> 0:01:29.080 Fast forward a few years later, I I'm an academic. 0:01:29.440 --> 0:01:31.440 I read an article that said, how do you know 0:01:31.520 --> 0:01:35.000 there isn't a race and tax problem until you look? 0:01:35.520 --> 0:01:40.880 And I thought, really, rates and tax So I went looking. 0:01:41.120 --> 0:01:43.920 And what I found over my twenty five years of 0:01:44.000 --> 0:01:48.440 research is that whenever black and white Americans engage in 0:01:48.480 --> 0:01:54.000 the same activity, tax policy subsidizes how white Americans engage 0:01:54.000 --> 0:01:57.800 in the activity, but penalize how Black Americans gage in 0:01:57.840 --> 0:01:59.840 the actor. So dig it down into that and ex 0:02:00.040 --> 0:02:04.360 laying that how is that happening? Yes, so we can 0:02:04.400 --> 0:02:06.960 start with marriage, which is what got me on this 0:02:07.040 --> 0:02:11.360 road to begin with. My parents were two equal earner couples. 0:02:11.400 --> 0:02:15.359 They both worked full time. My mother and father contributed 0:02:15.480 --> 0:02:21.600 roughly equal amounts. Contrast, that couple with a different married 0:02:21.639 --> 0:02:25.960 couple that has the same overall income that my parents had, 0:02:26.400 --> 0:02:29.800 but only earned by one person. One person works in 0:02:29.840 --> 0:02:34.000 the paid labor market, the other person works at home. Well, 0:02:34.200 --> 0:02:37.720 tax law gives a tax cut to the couple with 0:02:37.840 --> 0:02:41.079 the one wage earner, but no tax cut two couples 0:02:41.120 --> 0:02:45.079 like my parents, And for decades couples like my parents 0:02:45.440 --> 0:02:48.680 paid higher taxes when they were married. So what does 0:02:48.800 --> 0:02:51.520 race have to do with it? Guess what? When you 0:02:51.560 --> 0:02:54.480 look at Census Bureau data, you find out that my 0:02:54.720 --> 0:03:00.160 parents two equal earners were the typical black couple and 0:03:00.280 --> 0:03:05.399 the single wage earner getting a tax cut couple were white. Well, 0:03:05.440 --> 0:03:07.640 and I feel like there was many times, and I 0:03:07.680 --> 0:03:10.400 know the story that Ben Stephenman of Bloomberg Business Week 0:03:10.440 --> 0:03:12.640 road and thinking about in your book, that you know, 0:03:13.240 --> 0:03:16.040 tax policy, which you think would be color blind, Right, 0:03:16.120 --> 0:03:18.840 it's just policy, it's numbers, it's just you know, you 0:03:18.880 --> 0:03:22.079 go down and you do it. But disproportionately a lot 0:03:22.120 --> 0:03:24.600 of that policy. Disproportionate was the word that I was 0:03:24.639 --> 0:03:26.720 going to go for, you know, used a lot that 0:03:26.800 --> 0:03:30.600 disproportionately the policy, the tax policy, whether it was for 0:03:31.160 --> 0:03:36.000 homeownership or whether it was for marriage. It disproportionately impacted 0:03:36.280 --> 0:03:42.440 Black Americans. Yes, and why is that? It's because Black 0:03:42.480 --> 0:03:47.200 Americans live in a society with systemic racism. Why is 0:03:47.240 --> 0:03:50.640 it that you need to black couples right too, black 0:03:51.120 --> 0:03:54.520 spouses working to be able to bring in income that 0:03:54.720 --> 0:03:57.640 one spouse could could make. Well, part of it is 0:03:57.680 --> 0:04:01.520 the labor market, right, Why does the labor market devalue 0:04:01.960 --> 0:04:06.800 black and white workers where whereby they value white workers? 0:04:07.160 --> 0:04:11.800 So taxpayers bring their racial identities onto their tax return. 0:04:12.520 --> 0:04:14.040 So listen, we have a minute, and we're gonna take 0:04:14.040 --> 0:04:15.480 a break and come back because I want also get 0:04:15.480 --> 0:04:18.520 into the homeownership because this also leads into a big 0:04:18.560 --> 0:04:21.440 discussion we have here at Bloomberg about wealth creation. But 0:04:21.440 --> 0:04:24.600 just got about seconds. Who do you blame for this? 0:04:24.680 --> 0:04:28.080 Is it the policymakers? Who is it who's responsible for 0:04:28.120 --> 0:04:32.000 all of this? Well, it has to be the people 0:04:32.000 --> 0:04:34.040 who write the laws, right, It has to be in Congress, 0:04:34.120 --> 0:04:36.760 because we don't have tax policy without tax laws, and 0:04:36.800 --> 0:04:39.520 we don't have tax laws without Congress. Do you think 0:04:39.680 --> 0:04:42.880 any of the tax code that you have found through 0:04:42.920 --> 0:04:47.440 your research that that is biased? Do you think any 0:04:47.480 --> 0:04:49.680 of that will ultimately change? Because you've been pulled in 0:04:50.120 --> 0:04:52.240 by some of the staffers up on Capitol Hill, You've 0:04:52.240 --> 0:04:55.000 been consulted when it comes to race and tax and 0:04:55.000 --> 0:04:57.920 I'm just curious what the momentum is that you're hearing 0:04:57.920 --> 0:05:02.240 maybe for change, right. So I so we can start 0:05:02.279 --> 0:05:07.360 with President Biden's first Executive Order where he talked about 0:05:07.480 --> 0:05:12.520 racial equity across the government and talked about data by race, 0:05:12.760 --> 0:05:17.120 including the Secretary of the Treasury. Right. So, the President 0:05:17.200 --> 0:05:21.320 has said racial justice is important across the government agencies, 0:05:21.360 --> 0:05:24.680 including Treasury. Now, I think there's a disconnect between that 0:05:24.760 --> 0:05:29.360 executive order and the discussions to date with the Biden 0:05:29.360 --> 0:05:32.560 administration because they're talking about these tax policies, but they're 0:05:32.600 --> 0:05:35.359 not talking about the racial impact of these tax policy, 0:05:35.760 --> 0:05:40.279 which needs to be Biden administration has to figure out 0:05:40.760 --> 0:05:43.240 if you're committed, then you have to talk about it 0:05:43.320 --> 0:05:46.240 when you talk about tax changes. So let's get into 0:05:46.279 --> 0:05:51.000 two um in your book, how you talk about racist 0:05:51.400 --> 0:05:54.520 or racism and tax policy. When it comes to ownership, 0:05:54.640 --> 0:05:57.960 and we know I remember my dad, you know his grandparents, 0:05:57.960 --> 0:06:01.920 Like buying a home was a big part of creating wealth. Uh, 0:06:01.920 --> 0:06:03.839 and it enables you to pass some of that wealth 0:06:03.880 --> 0:06:07.719 onto subsequent generations. That's easier if you're a white American 0:06:07.839 --> 0:06:12.719 versus a Black American. According to your research, yes, and 0:06:13.000 --> 0:06:17.440 your grandfather was was able to probably get an f 0:06:17.600 --> 0:06:20.679 h A ensured loan when my grandfather couldn't have because 0:06:20.720 --> 0:06:23.200 of the color of my grandfather's skin. Right. So we've 0:06:23.200 --> 0:06:26.400 got this history of the federal government putting its thumb 0:06:26.400 --> 0:06:29.720 on the scale to help white Americans build wealth through 0:06:29.720 --> 0:06:33.919 homeownership and to prevent Black Americans from building wealth. But 0:06:34.000 --> 0:06:36.520 now we have all these laws that have passed and 0:06:36.560 --> 0:06:40.160 people think, oh, we just need to increase the percentages 0:06:40.200 --> 0:06:43.960 of Black Americans who are homeowners. But no, not so fast. 0:06:44.240 --> 0:06:48.640 In fact, what you see is white Americans can build 0:06:48.680 --> 0:06:52.360 a lot of wealth through homeownership, but Black Americans cannot. 0:06:52.400 --> 0:06:57.560 Why because we live in different neighborhoods. Most white Americans 0:06:57.640 --> 0:07:02.000 live in all white or almost all white neighborhoods. Most 0:07:02.040 --> 0:07:06.240 Black Americans live in racially diverse or all black neighborhoods. 0:07:06.240 --> 0:07:10.400 And the market responds to the race of the neighborhood. 0:07:10.840 --> 0:07:13.440 So if you live in a racially diverse or all 0:07:13.480 --> 0:07:16.320 black neighborhood, you're not going to get the appreciation on 0:07:16.400 --> 0:07:20.000 your home as you would if you lived if you're 0:07:20.000 --> 0:07:22.080 one of the few black families living in an all 0:07:22.080 --> 0:07:26.440 white neighborhood. As a result, when you live in an 0:07:26.440 --> 0:07:29.480 all white neighborhood, you sell your home at a gain. 0:07:30.160 --> 0:07:33.160 If you're married, half a million of that gain is 0:07:33.240 --> 0:07:37.160 tax free. Half a million dollars of wealth has been 0:07:37.200 --> 0:07:41.680 created because of where you live, and tax policy says 0:07:41.720 --> 0:07:44.840 you get to keep that. Well, what my research also 0:07:45.000 --> 0:07:48.600 showed it's Black Americans were more likely to not only 0:07:48.680 --> 0:07:52.520 get less of a game, but more likely to sell 0:07:52.640 --> 0:07:55.840 their home at a loss. And guess what, when you 0:07:55.880 --> 0:07:58.800 sell your home at a loss, you get no tax break. 0:07:59.280 --> 0:08:05.200 So tax policy comes on top of the racially discriminatory 0:08:05.200 --> 0:08:10.560 housing market and further disadvantages black homeowners when compared with 0:08:10.840 --> 0:08:13.600 white homeowners. You know, it's interesting because you do talk 0:08:13.640 --> 0:08:17.280 about to appreciation and valuation of homes and I guess 0:08:17.280 --> 0:08:19.960 how banks getting I mean, how do banks fit into 0:08:20.000 --> 0:08:25.560 all of this? Well, somebody hides the appraiser, typically the 0:08:25.560 --> 0:08:28.800 bank right and appraisers, and there have been actually some 0:08:29.040 --> 0:08:33.000 recent news stories on this that when the appraiser thought 0:08:33.040 --> 0:08:38.000 the homeowner was black, they devalued the home. When the 0:08:38.040 --> 0:08:42.160 appraiser thought the homeowner was white, they valued it higher. 0:08:42.800 --> 0:08:46.199 So we've got banks involved with the praisers. We also 0:08:46.280 --> 0:08:51.640 have banks with subprime mortgages and targeting black Americans for 0:08:51.840 --> 0:08:57.199 sub prime mortgages that they did not target equally suited 0:08:57.480 --> 0:09:00.599 white homeowners with subprime mortgages. So said, I'm gonna be 0:09:00.600 --> 0:09:03.440 a little provocative here because I'm getting some questions on 0:09:03.520 --> 0:09:06.400 my Twitter feed and elsewhere. But you know there are 0:09:06.440 --> 0:09:08.559 gonna be people like, well, people make choices about where 0:09:08.559 --> 0:09:10.520 they want to live and so on and so forth. 0:09:10.559 --> 0:09:15.840 What would you say to them? Oh, absolutely, people make choices, 0:09:16.240 --> 0:09:20.640 and the preferences or the choices of white Americans are 0:09:20.679 --> 0:09:23.679 what drives the values of the home. If you were 0:09:23.679 --> 0:09:27.520 a white American and your home was devalued because Black 0:09:27.559 --> 0:09:30.120 Americans viewed you in a certain way, you wouldn't like 0:09:30.160 --> 0:09:33.440 it either. Right. White Americans think the system is working 0:09:33.440 --> 0:09:37.160 okay because they're benefiting from it. But Black Americans are 0:09:37.160 --> 0:09:42.320 being disadvantaged because of where white homeowners choose to live. 0:09:42.920 --> 0:09:45.080 You know, there's so many things in here, you know 0:09:45.160 --> 0:09:47.920 that I think we think, okay, if you can get 0:09:48.000 --> 0:09:50.960 an education or you can buy a home, then anything 0:09:51.120 --> 0:09:54.360 is possible. And you really debunk these through all of 0:09:54.360 --> 0:09:56.240 the research and years that you put into this. I 0:09:56.240 --> 0:09:58.320 mean the other thing, you know, and I know we 0:09:58.360 --> 0:10:01.000 can't go into and do just everything that's in your book. 0:10:01.000 --> 0:10:04.760 And I highly recommended um because there's just so much there. 0:10:05.000 --> 0:10:07.120 But things like college we talk about it being the 0:10:07.160 --> 0:10:13.079 great equalizer, but again there are inequities there. Yes, yes, 0:10:13.400 --> 0:10:16.560 in fact, the title of that chapter is the Great Unequalizer. 0:10:16.760 --> 0:10:19.640 So right off the bat, we can talk about six 0:10:20.400 --> 0:10:25.040 of black college students don't graduate. So you you go 0:10:25.160 --> 0:10:28.400 to college, you get debt, but you don't graduate, so 0:10:28.440 --> 0:10:30.040 you don't have a degree, so you can't get a 0:10:30.120 --> 0:10:32.040 higher paying job that's going to help you pay off 0:10:32.040 --> 0:10:35.719 the debt. Right, So that's one thing. Another, uh important 0:10:35.760 --> 0:10:39.920 part of the puzzle is college graduates who have good 0:10:40.080 --> 0:10:43.480 paying jobs or more likely to send money home to 0:10:43.520 --> 0:10:47.640 their parents and extended family members who are suffering from 0:10:47.640 --> 0:10:50.280 systemic racism and Jim Crow and a lack of a 0:10:50.320 --> 0:10:54.760 safety net. Contrast that with white college graduates who are 0:10:54.800 --> 0:10:57.839 more likely to get money from their parents and their 0:10:57.880 --> 0:11:02.200 grandparents for down payment for write home to pay for 0:11:02.440 --> 0:11:05.760 the K through twelve private school of their children. So 0:11:05.880 --> 0:11:08.520 there is you know, there is no part of society 0:11:08.640 --> 0:11:13.040 where we can we Black Americans cannot be black. Well, 0:11:13.080 --> 0:11:15.280 I got to say that there's so much in there 0:11:15.320 --> 0:11:18.320 that is very provocative and thoughtful. Um, as you say, 0:11:18.440 --> 0:11:21.880 the tax system specifically, and all of these things that 0:11:22.000 --> 0:11:25.120 help a lot of Americans. Often white Americans build wealth, 0:11:25.200 --> 0:11:28.320 and you're not saying that equally when it comes to 0:11:28.440 --> 0:11:31.360 Black Americans. UM, it's all in this book, Dorothy, Thank 0:11:31.400 --> 0:11:34.320 you so much, really appreciate it. Dorothy Brown, Professor at 0:11:34.360 --> 0:11:36.800 Emory University School of Law. Her book is The Whiteness 0:11:36.840 --> 0:11:40.520 of Wealth, How the tax system impoverishes Black Americans, and 0:11:40.559 --> 0:11:41.800 how we can fix it.