New York (CNN) When filing your federal tax return, it is not necessary to identify your race. In addition, the US tax code does not contain provisions specific to a racial group. Yet just because the tax code is considered race-blind doesn’t mean it’s race-neutral.
A recent study by the Tax Policy Center, for example, found that black couples on average face higher tax costs associated with marriage than white couples. It is part of a growing body of research that shows the tax code can create or reinforce economic disparities between black and white households. households.
Research provides empirical evidence of the seminal work by jurists Dorothy Brown, Beverly Moran, and William Whitford, which raised the likelihood of racial inequities in the tax code.
Generally speaking, when American filers of any race marry, they may be hit with a “marriage penalty” or a “marriage bonus”, which means they pay more or less tax as a married couple than they would as two single people.
Penalties are more likely when both spouses in a couple work than among single-earner couples. And they are higher when two spouses each earn roughly the same amount of money. Penalties are also more likely when a couple has children.
If the financial facts of a black married couple were identical to those of a white married couple, there would be no difference in their tax burdens, said William Gale, co-director of the Tax Policy Center and co-author of his study on the marriage.
But the economic facts of blacks and whites are on average different.
For example, black married couples are more likely to live in a two-earner household; each spouse is more likely to earn approximately the same amount as the other; and they are more likely to have dependents.
“We find that black couples are more likely than white couples to experience a tax penalty due to marriage and to face higher penalties. We show that these patterns arise because, controlling for income, spouses blacks have more equal incomes than white spouses…and because black couples are more likely to have dependents,” the report’s authors write.
Differences in dollars and cents
The researchers found that among couples with a marriage penalty, black couples paid less in dollars ($1,804). versus $2,091) but more as a proportion of their income than white couples (1.8% versus 1.4%).
When researchers specifically focused on households with adjusted gross income between $50,000 and $100,000 under the current 2018 tax law, they found that 59% of black couples faced a penalty. marriage compared to 51% of white couples. Black couples paid about $150 more on average.
Only 33% of black couples received a wedding bonus compared to 44% of whites, and those bonuses were on average about $170 lower.
“Taken together, black couples in this income group paid, on average, a net penalty of $358. White couples in this income group received, on average, a net bonus of $61,” the report notes. .
The researchers found a similar pattern among most other income groups.
More work to come
The TPC study comes after the US Treasury released details on how to impute race and ethnicity to tax data – an effort made in response to an executive order from President Joe Biden ordering government agencies to better measure and advancing racial equity.
However, there is “no easy solution to racial disparities in the tax treatment of marriage in a tax code that does not explicitly refer to race,” the TPC authors noted in a blog post.
One option could be to let married couples file as unmarried individuals, they said, although this “would make the tax code less progressive and open up new opportunities for tax avoidance”.
It’s early days when it comes to detailing how tax and other federal policies affect racial equity and how differences can be healed, Gale said. “We are maybe in the second run. There is so much work to do.”