Tax policy and enforcement aren't race-neutral, two studies find
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Tax policy and enforcement aren't race-neutral, two studies find
Tax breaks and tax enforcement are not agnostic when it comes to race, according to a pair of recent studies.
White taxpayers disproportionately benefit from five studied tax breaks versus Black Americans, in many cases when adjusting for income, according to a Treasury study from the Office of Tax Analysis. And even when Black taxpayers benefit more than their white counterparts from one credit, they are then subject to more audits because of it, a second study from Stanford University found.
The findings, which confirm previous research on tax disparities, underscore how supposedly race-neutral tax systems and policies can actually magnify racial disadvantages and perpetuate bias.
“The recently released working paper from the Treasury Department and other research articles are consistent with previous research conducted by CFP Board and others,” Kevin R. Keller, CEO of the Certified Financial Planner Board of Standards (CFP Board), told Yahoo Finance. “While the findings are disappointing, they are not surprising.”
Where white taxpayers benefit more
The Treasury report examined eight tax expenditures: capital gains and dividends, charitable contribution deduction, pass-through income deduction, home mortgage interest deduction (HMID), exclusion for employer contributions to medical insurance, the child tax credit (CTC), premium tax credit (PTC), and earned income tax credit (EITC).
According to the study, 92% of the tax benefits from the capital gains preferential rate went to white taxpayers. Additionally, that percentage was 91% for the charitable donations deduction, 90% for pass-through income deduction, 84% for the mortgage interest deduction, and 82% for the employer medical exclusion.
The disproportionate tax benefit for whites narrowed some when it came to the child tax credit (CTC) and premium tax credit (PTC).
Capital gains
Many taxpayers' income is based on salary or hourly wages and is taxed around 37% or less, depending on income. However, capital gains income and dividends are taxed at a preferential rate of no more than 20%.
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