Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. So we promised
Speaker 1: you we would bring you this next guest. We talked
Speaker 1: about her a few weeks ago when she was the
Speaker 1: subject of a Bloomberg Business Week cover story for her
Speaker 1: work and career as a law professor documenting racism in
Speaker 1: a tax system that is supposed to be color blind.
Speaker 1: I am honored to bring in Dorothy Brown. She's professor
Speaker 1: of Emory University School of Law, author of The Whiteness
Speaker 1: of Wealth, How the tax system impoverishes impoverishes Black Americans,
Speaker 1: and how we can fix it. She joins us on
Speaker 1: the phone in Atlanta. Dorothy, Professor Brown, nice to have
Speaker 1: you here on Bloomberg. Welcome. Thanks so much for having me, Carol.
Speaker 1: So listen, UM, let's get right to it, because you
Speaker 1: this story that was the cover of Bloomberg Business Week
Speaker 1: magazine really did dig into the work that you have done. Um,
Speaker 1: and for those of you though that may have missed it,
Speaker 1: can you talk a little bit about how you got
Speaker 1: to this book, what you found out when it came
Speaker 1: to US tax codes. Yes, so I kind of fell
Speaker 1: into this. I didn't. I went into tax law thinking
Speaker 1: it had nothing to do with race. Deliberately went in
Speaker 1: a tax law thinking it had nothing to do with race.
Speaker 1: And I'm doing my parents tax return and I'm the
Speaker 1: numbers are not adding up. They seem to be paying
Speaker 1: too much in taxes, but I can't figure out why.
Speaker 1: And I have a graduate degree in tax law. I
Speaker 1: know what I'm doing, but something didn't add up. Well.
Speaker 1: Fast forward a few years later, I I'm an academic.
Speaker 1: I read an article that said, how do you know
Speaker 1: there isn't a race and tax problem until you look?
Speaker 1: And I thought, really, rates and tax So I went looking.
Speaker 1: And what I found over my twenty five years of
Speaker 1: research is that whenever black and white Americans engage in
Speaker 1: the same activity, tax policy subsidizes how white Americans engage
Speaker 1: in the activity, but penalize how Black Americans gage in
Speaker 1: the actor. So dig it down into that and ex
Speaker 1: laying that how is that happening? Yes, so we can
Speaker 1: start with marriage, which is what got me on this
Speaker 1: road to begin with. My parents were two equal earner couples.
Speaker 1: They both worked full time. My mother and father contributed
Speaker 1: roughly equal amounts. Contrast, that couple with a different married
Speaker 1: couple that has the same overall income that my parents had,
Speaker 1: but only earned by one person. One person works in
Speaker 1: the paid labor market, the other person works at home. Well,
Speaker 1: tax law gives a tax cut to the couple with
Speaker 1: the one wage earner, but no tax cut two couples
Speaker 1: like my parents, And for decades couples like my parents
Speaker 1: paid higher taxes when they were married. So what does
Speaker 1: race have to do with it? Guess what? When you
Speaker 1: look at Census Bureau data, you find out that my
Speaker 1: parents two equal earners were the typical black couple and
Speaker 1: the single wage earner getting a tax cut couple were white. Well,
Speaker 1: and I feel like there was many times, and I
Speaker 1: know the story that Ben Stephenman of Bloomberg Business Week
Speaker 1: road and thinking about in your book, that you know,
Speaker 1: tax policy, which you think would be color blind, Right,
Speaker 1: it's just policy, it's numbers, it's just you know, you
Speaker 1: go down and you do it. But disproportionately a lot
Speaker 1: of that policy. Disproportionate was the word that I was
Speaker 1: going to go for, you know, used a lot that
Speaker 1: disproportionately the policy, the tax policy, whether it was for
Speaker 1: homeownership or whether it was for marriage. It disproportionately impacted
Speaker 1: Black Americans. Yes, and why is that? It's because Black
Speaker 1: Americans live in a society with systemic racism. Why is
Speaker 1: it that you need to black couples right too, black
Speaker 1: spouses working to be able to bring in income that
Speaker 1: one spouse could could make. Well, part of it is
Speaker 1: the labor market, right, Why does the labor market devalue
Speaker 1: black and white workers where whereby they value white workers?
Speaker 1: So taxpayers bring their racial identities onto their tax return.
Speaker 1: So listen, we have a minute, and we're gonna take
Speaker 1: a break and come back because I want also get
Speaker 1: into the homeownership because this also leads into a big
Speaker 1: discussion we have here at Bloomberg about wealth creation. But
Speaker 1: just got about seconds. Who do you blame for this?
Speaker 1: Is it the policymakers? Who is it who's responsible for
Speaker 1: all of this? Well, it has to be the people
Speaker 1: who write the laws, right, It has to be in Congress,
Speaker 1: because we don't have tax policy without tax laws, and
Speaker 1: we don't have tax laws without Congress. Do you think
Speaker 1: any of the tax code that you have found through
Speaker 1: your research that that is biased? Do you think any
Speaker 1: of that will ultimately change? Because you've been pulled in
Speaker 1: by some of the staffers up on Capitol Hill, You've
Speaker 1: been consulted when it comes to race and tax and
Speaker 1: I'm just curious what the momentum is that you're hearing
Speaker 1: maybe for change, right. So I so we can start
Speaker 1: with President Biden's first Executive Order where he talked about
Speaker 1: racial equity across the government and talked about data by race,
Speaker 1: including the Secretary of the Treasury. Right. So, the President
Speaker 1: has said racial justice is important across the government agencies,
Speaker 1: including Treasury. Now, I think there's a disconnect between that
Speaker 1: executive order and the discussions to date with the Biden
Speaker 1: administration because they're talking about these tax policies, but they're
Speaker 1: not talking about the racial impact of these tax policy,
Speaker 1: which needs to be Biden administration has to figure out
Speaker 1: if you're committed, then you have to talk about it
Speaker 1: when you talk about tax changes. So let's get into
Speaker 1: two um in your book, how you talk about racist
Speaker 1: or racism and tax policy. When it comes to ownership,
Speaker 1: and we know I remember my dad, you know his grandparents,
Speaker 1: Like buying a home was a big part of creating wealth. Uh,
Speaker 1: and it enables you to pass some of that wealth
Speaker 1: onto subsequent generations. That's easier if you're a white American
Speaker 1: versus a Black American. According to your research, yes, and
Speaker 1: your grandfather was was able to probably get an f
Speaker 1: h A ensured loan when my grandfather couldn't have because
Speaker 1: of the color of my grandfather's skin. Right. So we've
Speaker 1: got this history of the federal government putting its thumb
Speaker 1: on the scale to help white Americans build wealth through
Speaker 1: homeownership and to prevent Black Americans from building wealth. But
Speaker 1: now we have all these laws that have passed and
Speaker 1: people think, oh, we just need to increase the percentages
Speaker 1: of Black Americans who are homeowners. But no, not so fast.
Speaker 1: In fact, what you see is white Americans can build
Speaker 1: a lot of wealth through homeownership, but Black Americans cannot.
Speaker 1: Why because we live in different neighborhoods. Most white Americans
Speaker 1: live in all white or almost all white neighborhoods. Most
Speaker 1: Black Americans live in racially diverse or all black neighborhoods.
Speaker 1: And the market responds to the race of the neighborhood.
Speaker 1: So if you live in a racially diverse or all
Speaker 1: black neighborhood, you're not going to get the appreciation on
Speaker 1: your home as you would if you lived if you're
Speaker 1: one of the few black families living in an all
Speaker 1: white neighborhood. As a result, when you live in an
Speaker 1: all white neighborhood, you sell your home at a gain.
Speaker 1: If you're married, half a million of that gain is
Speaker 1: tax free. Half a million dollars of wealth has been
Speaker 1: created because of where you live, and tax policy says
Speaker 1: you get to keep that. Well, what my research also
Speaker 1: showed it's Black Americans were more likely to not only
Speaker 1: get less of a game, but more likely to sell
Speaker 1: their home at a loss. And guess what, when you
Speaker 1: sell your home at a loss, you get no tax break.
Speaker 1: So tax policy comes on top of the racially discriminatory
Speaker 1: housing market and further disadvantages black homeowners when compared with
Speaker 1: white homeowners. You know, it's interesting because you do talk
Speaker 1: about to appreciation and valuation of homes and I guess
Speaker 1: how banks getting I mean, how do banks fit into
Speaker 1: all of this? Well, somebody hides the appraiser, typically the
Speaker 1: bank right and appraisers, and there have been actually some
Speaker 1: recent news stories on this that when the appraiser thought
Speaker 1: the homeowner was black, they devalued the home. When the
Speaker 1: appraiser thought the homeowner was white, they valued it higher.
Speaker 1: So we've got banks involved with the praisers. We also
Speaker 1: have banks with subprime mortgages and targeting black Americans for
Speaker 1: sub prime mortgages that they did not target equally suited
Speaker 1: white homeowners with subprime mortgages. So said, I'm gonna be
Speaker 1: a little provocative here because I'm getting some questions on
Speaker 1: my Twitter feed and elsewhere. But you know there are
Speaker 1: gonna be people like, well, people make choices about where
Speaker 1: they want to live and so on and so forth.
Speaker 1: What would you say to them? Oh, absolutely, people make choices,
Speaker 1: and the preferences or the choices of white Americans are
Speaker 1: what drives the values of the home. If you were
Speaker 1: a white American and your home was devalued because Black
Speaker 1: Americans viewed you in a certain way, you wouldn't like
Speaker 1: it either. Right. White Americans think the system is working
Speaker 1: okay because they're benefiting from it. But Black Americans are
Speaker 1: being disadvantaged because of where white homeowners choose to live.
Speaker 1: You know, there's so many things in here, you know
Speaker 1: that I think we think, okay, if you can get
Speaker 1: an education or you can buy a home, then anything
Speaker 1: is possible. And you really debunk these through all of
Speaker 1: the research and years that you put into this. I
Speaker 1: mean the other thing, you know, and I know we
Speaker 1: can't go into and do just everything that's in your book.
Speaker 1: And I highly recommended um because there's just so much there.
Speaker 1: But things like college we talk about it being the
Speaker 1: great equalizer, but again there are inequities there. Yes, yes,
Speaker 1: in fact, the title of that chapter is the Great Unequalizer.
Speaker 1: So right off the bat, we can talk about six
Speaker 1: of black college students don't graduate. So you you go
Speaker 1: to college, you get debt, but you don't graduate, so
Speaker 1: you don't have a degree, so you can't get a
Speaker 1: higher paying job that's going to help you pay off
Speaker 1: the debt. Right, So that's one thing. Another, uh important
Speaker 1: part of the puzzle is college graduates who have good
Speaker 1: paying jobs or more likely to send money home to
Speaker 1: their parents and extended family members who are suffering from
Speaker 1: systemic racism and Jim Crow and a lack of a
Speaker 1: safety net. Contrast that with white college graduates who are
Speaker 1: more likely to get money from their parents and their
Speaker 1: grandparents for down payment for write home to pay for
Speaker 1: the K through twelve private school of their children. So
Speaker 1: there is you know, there is no part of society
Speaker 1: where we can we Black Americans cannot be black. Well,
Speaker 1: I got to say that there's so much in there
Speaker 1: that is very provocative and thoughtful. Um, as you say,
Speaker 1: the tax system specifically, and all of these things that
Speaker 1: help a lot of Americans. Often white Americans build wealth,
Speaker 1: and you're not saying that equally when it comes to
Speaker 1: Black Americans. UM, it's all in this book, Dorothy, Thank
Speaker 1: you so much, really appreciate it. Dorothy Brown, Professor at
Speaker 1: Emory University School of Law. Her book is The Whiteness
Speaker 1: of Wealth, How the tax system impoverishes Black Americans, and
Speaker 1: how we can fix it.