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