President Joe Biden, under his first executive order on taking office, directed all federal agencies to examine their policies and programs to identify if they perpetuate barriers to equal opportunity. So under the U.S. Treasury Department, a new analysis published by the Office of Tax Analysis found even the certainty of taxes can produce widely different results when race is factored in.
White taxpayers reap more than 90 percent of the tax breaks for capital gains, charity deductions and small business exemptions, according to Treasury Department researchers. In addition, the fact that Black taxpayers are less likely to own their homes comes at a cost. White families benefited from mortgage interest deductions most overall, but wealthy Black families actually met or surpassed other upper-middle class taxpayers of all races. Black families also disproportionately benefit, as do Hispanic families from the Earned Income Tax Credit.
In a blog post, the Treasury Department explained, “Given the increased reliance on the tax system as a means of delivering benefits in recent decades, it is critical that we understand how tax policies affect different families and whether policies implemented via the tax code are reaching all families.”
The IRS doesn’t collect racial data when people file their tax returns, so the Treasury used secondary information, like zip codes, to estimate the likely race of a filer. They focused exclusively on Black, White and Hispanic people for this analysis “due to high levels of uncertainty in estimates for other groups.”
The paper concludes by noting that the study doesn’t address the tax code’s role in either promoting or reducing general income inequality by race, but that, “We leave a fuller examination of these issues to future research.”