The Whiteness of Wealth

A Review

This week I’ll be writing my thoughts on the book The Whiteness of Wealth: How the Tax System Impoverishes Black Americans--And How We Can Fix It by Dorothy A. Brown, a law professor and expert on tax policy. Before I get into it, I’d like to highlight a few things I’ve read this week which I think are worth sharing.

Reading Roundup

1. I’ve been a paying subscriber to Popular Information for almost two years now and I haven’t regretted it. Even in the few instances where I disagree with the framing of a specific point, I always appreciate the context that Judd Legum provides in each of his articles. His reporting reminds me what journalism could and should be, writing that holds the powerful to account and provides readers with as much information as possible, rather than just uncritically parroting the talking points of prominent people. This recent article breaks down Trump’s political play to get support from service workers by eliminating income tax on tips. Legum explains why this would likely benefit only the highest paid tipped workers and restaurant owners and how an increased minimum wage would go much further toward benefitting service workers (if that were the goal). - https://popular.info/p/trumps-tip-trick

2. For education reporting, I haven’t come across anyone better than Peter Greene. He was a long-time educator before reporting on education and he brings in nuance and a deep understanding of what classrooms and school systems actually look like to the people working and participating in them every day. I really liked this recent short piece of his as it cuts across several areas of interest for me. He notes the merger of Six Flags and Cedar Fairs (increasing monopolization of an industry), and how this will likely lead to worse experiences for thrill seekers if Six Flags continues its past strategy of raising prices to keep out undesirables (my word). He connects this to voucher/free-market education supporters to point out the free markets (which have never existed) often create premium products for the wealthy and poor quality, or even nothing, for the poor. Depending on how much you hate poor people, this could be a good thing, but I think for most people who value democracy and human decency, the better option is to focus on improving public education.

3. The above post on “premiumization” of education also reminded me of this excellent article from Phenomenal World on Supply-Side Healthcare, which analyzes the impacts of a 2019 law in Florida deregulating hospital construction.

“Some sixty-five new hospitals were planned in the three years after DeSantis signed the bill ending decades-old regulations on hospital construction called “certificate of need” (CON) laws, which could amount to as much as a 20 percent increase in total hospitals in the state.”

*Side note: I didn’t intend to bash Yglesias again, but the article notes a quote from him in Bloomberg: “Matthew Yglesias wrote in Bloomberg, advising that we “focus less on the way insurance works than on expanding care to increase competition and reduce prices.” And then proceeds to break down why things aren’t as simple as Yglesias makes it seem.

As the author notes, there is a lack of hospitals in many states across the U.S., however with detailed evidence he shows that a private-investor driven solution is already leading to huge investments in wealthy areas with access to healthcare while leaving out people in poorer and rural areas who are the market segment that actually lacks healthcare. He also notes: “Nor has the near doubling of hospital construction expenditures over the last decade done anything to reduce hospital expenditures, which have risen 20 percent in the same period.” There are so many interesting details in the article and I highly recommend anyone worried about the rising costs of healthcare read it to better understand why more free-market and private profit in the most expensive and most privatized healthcare industry in the world will not make things better.

Book Review

“I sit on a man’s back, choking him, and making him carry me, and yet assure myself and others that I am very sorry for him and wish to ease his lot by any means possible, except getting off his back.”

-Leo Tolstoy, What Then Must We Do?

The Whiteness of Wealth was published in 2022 and is an accessible primer on tax policy in the U.S. with a specific focus on how that policy has contributed to ongoing racial disparities in wealth. The book provides a brief overview of how racism can be embedded in institutions, considering that some laws in the U.S. today have not changed since before slavery was abolished, and other laws have evolved during segregation (which only legally ended in my parent’s lifetime).

One of the early topics of the book is on the tax benefits of marriage. Brown highlights how most people (myself and herself included) assumed that filing taxes jointly provides the same benefit for all married couples. She starts with the history of this marriage tax benefit, which took decades of lawsuits and lobbying from the wealthiest of Americans to bring about. Initially, a rich white man whose wife didn’t earn a salary decided that he shouldn’t pay his full tax rate and should be able to split his salary with his wife and each would pay the much lower rate on the split salary. He submitted his taxes like that and the IRS ordered him to pay the full amount he legally owed. He did, but then brought a lawsuit all the way to the Supreme Court, which allowed him to split his salary in his state based on a state law at the time. Rich people in other states started demanding the same and worked together to lobby to expand this benefit across the U.S.

As Brown explains, white families in the U.S. are much more likely to be wealthier for a variety of reasons, including the long history of slavery, segregation, and racism. The wealthiest of families are much more likely to have a large disparity in incomes earned between spouses, where one partner (normally the husband) has a large salary and the other does not work or brings in a much smaller salary. This means that when filing jointly, wealthy couples are often able to greatly reduce the taxes they would have paid had they been two separate earners. She also details the many other benefits that come from one spouse not working full-time including child-care costs, and all the many other responsibilities required to run a household.

On the flip side, black families are much more likely to be working class in the U.S., meaning both spouses work and likely bring in similar salaries. In this case, filing jointly may provide a benefit, but it would be nowhere near the tax reduction of a high-income person with a zero-income spouse. Not to mention the many intangible difficulties of having both partners work full time (or more than 40 hours/week) including reduced time spent with family, and broadly less time for everything as people juggle the responsibilities of running a household and scheduling appointments and everything else with much less time.

The book’s strength lies in describing the history of these policies. As I have argued in multiple previous posts, when you understand the history and the thought process behind policy changes, you start to see that everything that was created by people can be changed and undone by people. I learned many interesting facts about the evolution of the tax system, including the creation of the income tax, and the fact that originally married couples actually had a lower tax deduction because they should experience cost savings just by the nature of living together and sharing costs. The book also briefly mentions the history of the Great Depression and WWII and federal policy which rather than creating a public health system like many other nations, encouraged employers to offer untaxed benefits like health insurance to their employees. This was due to many wage controls implemented during the war effort which prevented companies from offering higher wages, but they could offer other benefits to attract employees. For a deeper look at the history of taxation in the U.S., I recommend this Throughline episode from NPR.

Brown continues on to show how tax deductions for mortgage payments (but not rent payments), deductions for business losses (but not losses for a homeowner whose house depreciates), bankruptcy for business and many other types of loans (but not student loans), and preferential tax rates for investment income (but not wage income) all contribute to an unfair playing field for the wealthy and therefore contribute to the racial wealth gap in the U.S.

Brown notes that it doesn’t matter much if the stated intent of a policy is not racist/discriminatory if the outcome is the same. While the book is focused on the very important topic of racial disparities, I think it is important to note that most of these issues and the proposed solutions affect the vast majority of Americans. Because wealth is so racialized in the U.S., in the context of the arguments of these books, all of the policies that reduce the racial wealth gap, would create a fairer tax system for everyone. In fact, even this poorly argued right-wing critique of the book agrees with many of the proposed changes to the tax system. Some of her proposals include marriage neutrality, meaning people don’t get a tax benefit just for being married, which would also reduce the government meddling in people’s private lives, and mortgage neutrality, meaning ending the massive subsidies that renters provide to homeowners through mortgage tax deductions. She also argues for simplifying the tax code overall, while introducing a higher progressive tax on top earners and higher taxes on “passive income” such as investments as this would encourage the wealthy to work rather than relying on their wealth to accumulate more wealth and keep expanding the divide between rich and poor. All of these proposals are backed with studies and comparisons with similarly wealthy nations who have often had these policies in place for a long time.

There is quite a bit more I could say about the book. I learned a lot from it, and I recommend it for anyone who wants to understand U.S. tax policy and the history of tax reform without slogging through an academic book on policy. The final piece I wanted to highlight is one Yale survey Brown cites in the book which sought to understand people’s perception of wealth and race in the U.S. In the survey, respondents thought that in 1963 black families had around 1/2 the wealth of white families and that in 2016 they had about 9/10 the wealth of white families. In reality, there was no change in the wealth of black families vs. white families between 1963 to 2016 and black families have had 1/10 the wealth of white families for that entire period.

Near the end of the book, Brown mentions that she interviewed many families to get their perspective on wealth and taxation and almost invariably, white families asked to not be named when discussing the sources of their wealth. There is a cultural taboo against mentioning inherited wealth and the many privileges that allow wealthy white people to maintain their socioeconomic status. This leads many people to mistakenly believe that wealth is mainly gained through hard work, and if someone is poor they must not be working hard enough. In reality, the main indicator of a person’s future success in the U.S. is their parents’ wealth. On top of this general taboo, people tend to misidentify themselves as working class (the link is a study of British society, but parallels closely my own experience speaking to relatives and friends), often drawing on more distant family histories of work and sacrifice to obscure the more recent history of privilege one was born into.

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