Targeted Tax Reforms Can Help Close the Racial Wealth Gap

Fixing hidden inequities in the tax code can close the racial wealth gap and create a more just future.

Early in my legal education, tax law beckoned me with a career opportunity that promised objectivity. I liked its reliance on hard numbers, and my law professors said green was the only color in the field that mattered.

This came as a relief after years growing up in the South Bronx where I experienced ongoing racism. I’d had enough. I longed for a career path that wasn’t defined by the daily burden of racism.  After graduation, I practiced tax law and then became an investment banker.

I also started filing taxes for my parents. My Mom was a nurse, my Dad a plumber, and I noticed something surprising about their returns. They were paying only a little less in taxes than I was, although I was a single woman earning a higher salary than the two of them combined. I thought someday I’d investigate this more closely.

Eventually, I moved to an academic setting and thrived as a tax law professor. But soon enough, my intellectual pursuits shattered any hope I had of getting away from racial inequity. That awakening began when I read an article by my mentor, who challenged Black law professors to call out race in their own specialty areas. I respected this man and though its relevance to my field still seemed opaque, I decided to take a closer look at the tax code.

At first, my colleagues thought I was chasing an illusion. “Tax law has nothing to do with race,” they insisted. “Dorothy, your work is irrelevant.” Their certainty might have discouraged me—except every time I dug into another tax provision, I found a racially disparate impact. I realized my peers were wrong.

The Truth about the Tax Code

One of the first things I examined was the tax consequences of marriage, and that’s when I understood my parents’ situation. When two partners have roughly equal incomes and file a joint return, they may be pushed into a higher tax bracket than a single person earning the same total salary. This is known as the marriage penalty, and it is more likely to affect Black couples than White ones. The Tax Policy Center does a nice job explaining how total family income, the relative income of both spouses, and the number of dependents can all contribute to the disparity.

Housing is yet another area where the tax code reinforces inequality. The ability to deduct mortgage interest from income favors those who borrow more money against higher-value homes, which tend to be White families. They are also most likely to see their home values rise significantly over time. As a result, White families are more likely to benefit from the $500,000 tax exclusion available to married couples when they sell. In Black and mixed-race neighborhoods, homes often gain value more slowly, if at all, and in some neighborhoods they actually lose value—but there is no deduction for selling a home at a loss. The tax-free status of an inherited home likewise means that most families pay nothing to pass on what is generally their most valuable asset, so wealth moves from generation to generation without cost to the heirs.

And then there are workplace benefits. In certain white-collar jobs, as much as one-third of a professional’s income might come from tax-free health insurance, employer contributions to retirement accounts, and perhaps low-interest loans for home purchases or a child’s education. Once again, this accrues mostly to White workers, who are disproportionately represented in higher-income positions.

My book, The Whiteness of Wealth: How the Tax System Impoverishes Black Americans–and How We Can Fix It, shows how all of these inequities contribute to the racial wealth gap. The resulting health risks are well documented. I’m proud to say that my writing helped stir interest in this topic and silenced some voices claiming tax laws are color blind. A team of scholars cited my work as inspiration for their own research, published in 2023. It showed that Black taxpayers are at least three times more likely than White ones to be audited by the IRS.

Bold Solutions and Patterns of Inequity

Overhauling the tax code takes political will and in the recent past, there has been some movement toward reform. After confirming the audit findings with its own study, the IRS acknowledged the racially disparate outcome and developed a plan for change. Another welcome move was the launch of the Treasury Department’s Advisory Committee on Racial Equity, which I had the honor to serve on. Unfortunately, the White House dismantled the committee in January 2025 as part of its broader pushback against diversity, equity and inclusion (DEI) initiatives.

But changing systems is a long-term effort, and we need to keep developing good ideas. One tested strategy is an expanded child tax credit. An expansion initiated during the COVID pandemic kept an estimated 3.7 million children out of poverty while it was in effect and should be immediately reinstated. A complementary idea is a wealth tax credit for any taxpayer whose assets fall below the nation’s median level. Such a credit would be available to all qualifying populations, but in practice would disproportionately benefit people of color. I’d also like to see employers required to audit wage records to determine if Black and White workers are being paid equally, with their wage deductions at risk if they can’t document fairness within a reasonable time frame.

These ideas will face opposition, especially in the current political climate. But I’ve learned to be fearless about exposing the racial bias embedded in the federal tax code. I focus on taxation because that is my life’s work. Still, let’s be honest about the larger patterns that are playing out. Inequities in how we tax earnings and assets are just one manifestation of the broader systemic racism that people in power have created. Anti-discrimination protections and DEI initiatives threaten their power, prompting backlash in the form of political attacks and executive orders rolling back federal protections.

As my mentor urged many years ago, everyone should take a race lens to their own areas of expertise and share their observations and findings widely. We should all open our eyes to the structural barriers that hold some back from the opportunity everyone deserves—to live their healthiest life possible. Together, we can reinvent our laws and practices and change systems so that health is no longer a privilege, but a right.

About the Author

Dorothy Brown is a law professor at Georgetown University and author of “The Whiteness of Wealth: How the Tax System Impoverishes Black Americans and How We Can Fix It.” Dorothy is known for her work on tax policy, workplace equity and inclusion, and law school reform. She is an advocate of collecting and sharing data on tax and race to inform the tax system.