SHINING A BRIGHT LIGHT ON THE COLOR OF WEALTH.

• Author: Dickerson, A. Mechele
• Position: Annual Book Review Issue

THE WHITENESS OF WEALTH: HOW THE TAX SYSTEM IMPOVERISHES BLACK AMERICANS--AND HOW WE CAN FIX IT. By Dorothy A. Brown. New York: Crown. 2021. Pp. iv, 288. $27.

INTRODUCTION

Professor Dorothy A. Brown (1) boldly asserts in The Whiteness of Wealth: How the Tax System Impoverishes Black Americans--and How We Can Fix It that "whiteness has consistently and continually played a serious role in wealth building" (p. 20). Using stories from her life and the lives of other Black taxpayers, Brown methodically exposes how the same tax laws and policies that help whites build intergenerational wealth impoverish Blacks. Although readers who lack a business or legal background may not grasp the intricate technicalities of the Internal Revenue Code sections that Brown dissects, that does not matter. The clarity of Brown's writing, her storytelling, and vivid examples involving her parents (Miss Dottie and James) and other ordinary Black taxpayers convey complex points--think tax policy preferences for horizontal equity or the lock-in effect--with ease.

This Review examines Brown's powerful assertion that tax policies build and protect intergenerational white wealth and exacerbate the racial wealth gap by subsidizing activities and personal choices that disproportionately benefit white taxpayers. Those stunned by the enormity of this racial wealth gap will be horrified to learn that tax policies were designed to create white wealth. Part I describes how tax policy impacts taxpayers differently throughout their lives. It begins by discussing educational tax subsidies, followed by workforce subsidies, marriage and home ownership subsidies, and inheritance subsidies. Using Whiteness of Wealth as a starting point, this Review bolsters Brown's findings with additional data to illustrate the stark disparities embedded in and perpetuated by our tax policies.

Part II explains how Brown dismantles the traditional conservative claim that the best way for Blacks to close the racial wealth gap created by "decades of historical discrimination against [B]lack taxpayers" is to mimic white behavior (p. 215). It then explores how this hard-work trope has been misused to explain ways that financially vulnerable lower- and middle-income families across races can become and remain middle class.

1. BUILDING AND PROTECTING WHITE WEALTH

   Whiteness of Wealth evaluates tax policies that subsidize activities that help white taxpayers amass generational wealth and, in the process, exacerbate an already enormous racial gap. According to the Federal Reserve's 2019 Survey of Consumer Finances, white median wealth was roughly eight times the wealth of the typical Black family--$188,200 compared to $24,100. (2) This racial wealth gap has barely budged since the 1950s and 1960s, (3) has persisted even as overall household wealth increased, (4) and endures today because of the outsize share of white wealth.

   Brown argues that federal tax policies exacerbate the racial wealth gap by ignoring "the reality of societal differences based on race" (p. 22), which are present throughout taxpayers' lifetimes, encompassing everything from going to college, working, marrying, and buying homes (pp. 22-26). Brown contends that the taxpayers most likely to make choices that are subsidized by tax policy are white. The following sections address each of these choices and how tax policies maintain and exacerbate racial wealth gaps.

   1. Subsidizing Elite Education

      Whiteness of Wealth argues that tax subsidies have turned the college degree, the gateway to the middle class for lower-income children, into an unequalizer. Brown's primary criticism is that educational tax policies allow elite (5) public and private tax-exempt colleges and universities that sit atop the educational "pyramid" (p. 99) to avoid paying federal (and often state or local) taxes on their real property or endowment income (p. 101). These tax savings allow elite institutions to build large endowments and, as a result, spend more on financial aid and academic support.

      As recent studies show, financial aid constitutes 48 percent of all endowment spending. (6) Tax policies that subsidize elite colleges have a particularly beneficial impact on the students who attend those institutions as these students receive more generous need- and merit-based7 financial assistance than students at institutions with smaller (or no) endowments. This financial support reduces their college costs and helps them avoid crippling student loan debt. Whiteness of Wealth argues that these ostensibly race-neutral educational tax policies make college an unequalizer because the students who attend elite tax-subsidized universities are disproportionately white (and upper income). (8)

      Black (and lower-income students) are more likely to attend schools that offer smaller (or no) financial aid awards: less-resourced, nonselective public colleges, community colleges, for-profit institutions, and chronically underfunded Historically Black Colleges and Universities (HBCUs). (9) Students must borrow heavily to pay for a for-profit education and thus are saddled with student loan debt, (10) and students at HBCUs are often charged higher interest rates on student loans compared to students at elite, tax-exempt colleges. (11) Black students generally borrow more to pay for college because their parents have lower overall household income and wealth. (12) Because their parents are also less likely to invest in tax-favored college accounts like 529 savings plans (pp. 119-24), it is harder for Black parents to give their children the same level of financial support as white parents. (13) As a result, Blacks have more student loan debt than their white counterparts particularly because they are less likely to attend elite institutions with tax-subsidized endowments.

      In addition to disparities in financial aid, elite institutions use their tax savings to provide enhanced academic support. (14) These savings also have lifelong benefits for the predominantly white students who attend colleges with large endowments because increased spending on teaching, advising, and student outreach "tend to improve key measures of student success like graduation rates and time-to-degree." (15) Educational tax policies do more than just reduce students' college costs and ensure timely graduation: these policies perpetuate inequities that have far-reaching intergenerational wealth effects.

      Research repeatedly confirms that workers with college degrees, particularly from elite colleges, (16) receive an earnings premium (i.e., higher current and lifetime wages relative to noncollege workers of the same age, gender, and race). (17) In contrast, students who attend for-profits receive lower earnings than both graduates of elite colleges and of lower-cost public two-year community colleges. (18) In addition, a recent report estimated that graduates of for-profits would need to earn as much as 60 percent more than community college graduates to have comparable disposable income given their higher monthly loan payments. (19) These intergenerational effects fall along racial lines with students who attend predominantly white, elite institutions having on average higher lifetime earnings in comparison to graduates of nonelite institutions (pp. 99-103). (20)

      Further, the average wealth for white college graduates was 7.2 times the average wealth for Black college graduates between 1992 and 2013, (21) and wealth actually decreased for Black college graduates compared to white college graduates during this period. (22) Worse yet, average wealth for white noncollege households after the Great Recession was roughly double ($64,200) that of Black households headed by college graduates ($37,600). (23) Perhaps college isn't the great equalizer after all.

      Finally, being a white college graduate increases the likelihood that one's children will be college graduates and have higher household wealth. (24) For example, seven in ten children of non-Black college graduates also have a college degree compared to only one in three children of Black college graduates. (25) Moreover, the children of white and rich college graduates are more likely to attend elite institutions, receive an earnings premium, and amass additional household wealth than college- educated workers with noncollege parents. (26) While household wealth is generally higher for households with college degrees, having a college degree does not help Blacks accumulate wealth in the same way it helps whites.

      As Whiteness of Wealth shows, although college degrees "generally translate into higher income," this does not occur evenhandedly for all (p. 131). The educational tax policies that subsidize elite colleges ignore the racial reality that Blacks are less likely to benefit from these subsidies and therefore are less likely to be on track to accumulate wealth.

   2. Workforce Subsidies and Wealth Building

      Similar inequities persist when Blacks enter the workforce. White workers have had significant advantages in U.S. labor markets since 1619 when white Europeans chose to enslave Black people, deprive them of their earned wages, and make it impossible for them to use their income to buy property and build wealth. (27) Whiteness of Wealth explores the links between the past and present and contends that "[i]n the labor market, full access to government subsidies has often been preconditioned on being white" (p. 135). As Brown notes, Black workers have always been segregated into jobs with weaker labor law protections and fewer employment benefits (p. 138).

      Although employers can no longer "pay [Bjlack workers less [and] keep them out of jobs that could be filled by white workers" (p. 138), labor market discrimination still exists. (28) Whiteness of Wealth illustrates how the legacy of racist employment practices, combined with ongoing labor market discrimination, leaves Blacks disproportionately less likely to have jobs that...