In a normal year, today is Tax Day in America. Millions of households would typically hit submit sometime this week to file their taxes and receive returns from state and federal governments. The COVID-19 pandemic pushed the federal filing deadline back, but that doesn’t change the fact that there are blatant racial disparities in our tax system.
Currently, the IRS doesn’t ask for a filer’s race or ethnicity. Other disparities reveal themselves in our actual tax code; the rules that dictate how much we owe our government every year.
One of the most obvious expressions of such inequality is who benefits the most from tax breaks. While your mind might jump to billionaire tax breaks that have allowed figures like Jeff Bezos and Elon Musk to avoid surrendering significant chunks of their wealth, these tax breaks exist for the middle-class too.
For example, the government offers deductions for mortgage interest payments. In other words, if you’re paying a mortgage, you end up paying less on your taxes. Studies have determined that such provisions will cost the federal government over $280 billion between 2019 and 2022 alone.
It’s well-documented that homeownership varies widely by race. White taxpayers are about 16% more likely to own their home than the next highest group, the AAPI community. Black people are more than 30% less likely than their white counterparts to own their home.
This gap in homeownership and corresponding inequality in tax benefits is the result of discriminatory housing practices like redlining. Redlining was the practice of denying home loans to people of color based on where they wanted to move, creating intentionally majority-white neighborhoods.
Such historical discrimination surfaces when we look at the tax policy of today.
The IRS asks for identification information when filling out taxes. Requiring a social security number leaves millions of undocumented immigrants unable to pay taxes. Black filers are also less likely to seek eligibility for marriage deductions as well as IRA contributions, pensions, and dividends.
Another blind spot in our tax code is student debt. The IRS offers deductions for payments on the interest of student loans – as long as households earn less than $80,000 for singles and $165,000 for joint filers. This can’t be used by those with no income tax liability, however, and therefore benefits mostly middle- and upper-class white families.
Although students of color are more likely to borrow, they don’t really enjoy noticeably more tax relief. Families of Black and Brown borrowers have debt-to-asset ratios way higher than white families, making it more likely the former group will default on loans.
Tax policy helps reveal systemic inequities that already exist. Admittedly, a number of deductions and relief mechanisms seek to lessen the burden on lower-income families. But those are small, retroactive solutions to vast problems. To reflect social justice and equality in our tax code, we can’t simply change IRS policy and move on. The root causes of these gaps (affordable housing, the student loan crisis, citizenship, etc.) are more worthy of reform.
We think about “leveling the playing field” through taxation so often. Proposals from a number of high-profile federal legislators seek to bolster social services through taxing the ultra-wealthy among us. And these changes can really make a difference in the lives of marginalized groups.
If we think of taxes as a product of – not the cause of – inequality, we can shift focus to the larger discrimination inherent to our institutions.