TAX POLICY AND OUR DEMOCRACY.

• Author: Wallace, Clinton G.

OUR SELFISH TAX LAWS: TOWARD TAX REFORM THAT MIRRORS OUR BETTER SELVES. By Anthony C. Infanti. Cambridge: The MIT Press. 2018. Pp. xi, 159. $39.

RACIAL TAXATION: SCHOOLS, SEGREGATION, AND TAXPAYER CITIZENSHIP, 1869-1973. By Camille Walsh. Chapel Hill: The University of North Carolina Press. 2018. Pp. xii, 176. Cloth, $90; paper, $29.95.

INTRODUCTION

In her new book, Racial Taxation: Schools, Segregation, and Taxpayer Citizenship, 1869-1973, Camille Walsh (1) describes the following episode. In the early twentieth century, the citizens of Covington County, Mississippi (population in 1920: 14,8692) had established two school districts, one for "colored" (i.e., black) students and the other for white students. (3) The black schools were partially funded by a 10-mill tax on land in the black district, (4) and all of the landowners in the district were black. (5) The white district, which was much larger geographically, was also partially funded by a 10-mill tax on land in that district. (6) The separate districts with equivalent 10-mill tax rates established some semblance of adherence to the separate-but-equal doctrine of the day. But there was a clear inequity, even viewed through that discrimination-permissive lens: the white district covered and included almost all of the black district. (7) The law required black landowners in the overlapping area to pay two separate 10-mill taxes on their property--one to fund the schools that their children attended in the black district, and one to fund the schools that their children were prohibited from attending in the white district. (8) At the same time, no white landowner was required to pay tax to the black district. (9) Black landowners were being double taxed, white landowners taxed once.

The prospect of "double taxation" is generally perturbing to tax policymakers and analysts, although the concept is murky: any double tax is the economic equivalent of a single tax at double the rate. (10) The prospect of double taxing where some are single taxed is thought to offend each of the traditional criteria for evaluating tax policy--equity, efficiency, and administrability. (11) Double taxation is inequitable because it can result in similar things (taxpayers, taxable items) being taxed differently; it is inefficient because different tax treatment of similar things can alter behavior in unfavorable ways; and it can cause administrative challenges by increasing the enforcement burden on the government. (12)

Given that double taxation is so widely treated as problematic for equitable, efficient, and administrable taxation, what was the tax policy analysis of the double taxation imposed on black property owners in Covington County, Mississippi? Neither courts nor policymakers (so far as I can determine) took on the problem of double taxation in and of itself. And, perhaps not surprisingly given the time and place, courts rejected claims that the double taxation policy violated the Equal Protection Clause of the U.S. Constitution. The racist double taxation regime was upheld by the Mississippi Supreme Court. (13)

Nearly 100 years later, Fourteenth Amendment doctrine has advanced to recognize that explicitly racist government policies are unacceptable. Because the district lines in Covington County were explicitly drawn to segregate black students, and race is not a justifiable distinction under the Equal Protection Clause, the same school funding scheme, enacted today, would clearly be unconstitutional.

But the tax policy world has not experienced even a modest degree of evolution--for example, it does not incorporate a no-racism standard. (14) Tax equity analysis is almost exclusively focused on economic distribution--who pays how much and who gets how much. (15) In fact, in contrast to other federal government agencies that oversee social policy, the IRS does not even track the effects of tax policy on different racial groups. (16) Rather, as Anthony Infanti (17) describes in his new book, Our Selfish Tax Laws: Toward Tax Reform that Mirrors Our Better Selves, analyzing tax policy along these margins has been relegated outside of the "mainstream" of tax policy analysis (Infanti, pp. 13-14, 39).

Consider a double taxation school funding scheme written in a "race-neutral" way--that is, a scheme that did not violate the Fourteenth Amendment (18) but that nonetheless resulted in most black people paying twice the rate of most white people. That sort of purported race neutrality with vastly different racialized effects, in fact, describes property tax structures across many U.S. states today. Further, as was the case in Covington County and across Jim Crow America, black taxpayers are often condemned to schools significantly worse than the schools for white taxpayers.

Here's one example: In the Eastpointe, Michigan school district, a few miles northeast of Detroit, 72% of the students are black, (19) and the schools are funded by a property tax at a rate of around 67 mills. (20) In Birmingham, about 20 miles to the west, 78% of students are white, and the tax rate is 27 mills. (21) The Eastpointe rate is 2.4 times the Birmingham rate--how different are residents of Eastpointe from the residents of the black district in Covington County in the 1920s? Modern tax literature has not critiqued this sort of rate differential, perhaps because the rates are set by different localities. The result of the double taxation is counterintuitive, though: the Eastpointe schools spend $10,099 per student and the average teacher salary is $48,000 per year; just 71% of students graduate, 24% have satisfactory scores on reading proficiency exams, and 12% have satisfactory scores in math. (22) In Birmingham, the respective numbers are $16,195 per student, over $69,000 per teacher, a graduation rate of 96%, and 76% proficiency in reading along with 68% proficiency in math. (23)

These sorts of disparities in tax rates, funding levels, and devastatingly disparate educational outcomes have been litigated under the Equal Protection Clause, but to no avail. (24) Although intentional discrimination, referred to as "disparate treatment," is clearly prohibited under the Equal Protection Clause and thus rarely arises in tax policy, "disparate impact" school financing schemes that are "facially neutral practices with discriminatory effects" (25) do not violate equal protection and have proliferated. (26)

In a blight on the tax academy and on the state of tax policy in America, this sort of modern-day double taxation arrangement continues with little notice or objection from tax academics. (27) For example, the Supreme Court's opinion in San Antonio Independent School District v. Rodriguez, (28) the seminal Supreme Court holding on school funding mechanisms and the Fourteenth Amendment, has been cited just seven times total in any leading tax-focused law journals, and citations to it are exceedingly rare in any tax law-oriented academic articles. (29)

Further, local property taxes are far from the only tax regimes with disparate racial impacts that mainstream tax analysis has disregarded. (30) As a colleague poignantly observed, faced with poll taxes--a racialized affliction on American democracy through much of the twentieth century--standard tax equity analysis misses the real social issue at stake: it would conclude that poll taxes are unfair because they fail to account for varying abilities to pay. (31) Because, in this analysis, equity is focused on distribution, and distribution is evaluated based on whether an individual taxpayer is able to bear her tax burden, a blatantly racist tax policy could pass muster, as could a tax policy that inhibits a fundamental democratic right. (32)

But something must be missing from that tax policy analysis. As elaborated in Part II of this Review, Walsh's and Infanti's books explore the extent to which tax analysis and tax policymaking have persistently failed to account for these sorts of social concerns. Just as the standard tax policy analysis has had little to offer to understand or recognize racial inequity, it also has little to say regarding gender discrimination or heteronormativity in the tax code, differences in physical ability, or power dynamics. (33) Walsh and Infanti each call for a more inclusive tax policy that accounts for these sorts of effects.

Inspired by Walsh's and Infanti's and others' work considering the nexus of tax policy with political power, inequality, and social hierarchies, (34) Part III of this Review considers how tax policymakers can meaningfully confront tax laws that perpetrate these ills. I argue that the two books show how U.S. tax policies and tax systems undermine the foundations of democratic governance--tax policy has weakened the system of government that is supposed to be characterized by collective decisionmaking with equality among the decisionmakers. (35)

To respond, I suggest recalibrating tax policy and tax policymaking to account for democratic values. Tax systems are a key point of contact between citizens and their governments. The act of paying taxes in a democracy could be an opportunity for government to justify itself to the taxpayer and for the taxpayer to build faith in government institutions. (36) These considerations suggest that the substance of tax policy, and community members' experiences with the tax system, should be conceived to purposively strengthen democracy and connect democratic institutions to citizens. Unfortunately, the racialized tax history Walsh presents and the portrait of contemporary tax policy Infanti renders show our tax systems doing the opposite.

Engaging in tax policymaking that strengthens our democracy requires defining the democratic values that tax policy can and should strengthen. This Review builds on work by critical tax scholars--including Infanti--and other work proposing a more expansive view of tax equity. (37) I begin to sketch out a broader array of...