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| Law professor Dorothy Brown is teaching
the short course Critical Race Theory at the Law School this semester. |
Posted February 3, 2004
Marriage-Penalty Tax Hurts Black
Families More, Brown Says
Federal tax laws that hurt dual-income married couples disproportionately
hurt African-American households, said visiting law professor Dorothy
Brown, noting that married black women account for 40 percent of
their household's income, while married white women's income accounts
for only 29 percent. Although tax laws are written to be neutral, they
can have varying impacts on households of different races, Brown explained
at a luncheon sponsored by Women
of Color Feb. 3. The discrepancy may result in part because African-American
employees don't earn wages equal to whites, which may encourage black
women to work in support of the family income.
“You need targeted marriage penalty relief for dual-income couples,” Brown
argued. When joint federal tax returns began in 1948, 80 percent of
husbands worked and had a stay-at-home wife, thus the law benefited
most of the population—although married black women likely worked more
than white women then as well. “Now you see many more couples where
you need both individuals working to pay the bills.”
Brown, a critical race theorist visiting from Washington and Lee University's
School of Law, said she was inspired to study the issue by a colleague's
call for black scholars to look at how taxes might impact African-Americans
differently, and a U.S. Commission on Civil Rights report noting the
differences in the proportion of dual-income houses by race.
Brown described both the marriage bonus and penalty effects of the
federal income-tax structure: if a married couple includes one spouse
earning an income and another who stays at home, they receive a tax
break, but married individuals who both work are taxed more than if
they weren't married. For the couple receiving the marriage bonus with
an income of $50,000, “that $50,000 is going to be taxed at a rate
where some of that income is effectively shifted to the other spouse.”
Brown studied U.S. Census data and found that bonus households are
most likely white and penalty households are most likely to be black
at virtually all income levels. In the $50,000-$60,000 bracket, 26
percent of whites are affected by the penalty, while 43 percent of
African-Americans are. In the $80,000-$90,000 range, the number of
African-American households penalized jumps to 49 percent, while 27
percent of white households are affected.
“Black husbands and black spouses are most likely to earn roughly
comparable amounts,” she said. Black women are much less likely to
be married than white women as well, Brown said, so “are tax costs
facilitating the lower marriage rates in blacks?”
Many tax-law academics don't see race as an issue, she said, but even
former Supreme Court Justice Harry Blackmun “recognized that there
might be a racially disparate impact” from laws that appear neutral
on the surface. But “uncovering the disparity isn't that easy.”
Brown is also exploring how the earned-income tax credit may affect
American households of different races and incomes. “At the low-income
level, $10,000 and less, I found most households . . . [black or white]
were in single wage-earner households.” She noted that if you are a
single parent making $10,000 and have two children, you get a $2,000
earned-income tax credit, but if you then marry someone making $10,000,
the credit is virtually eliminated. “It's a huge—percentage-wise—penalty,
because of how the earned-income credit operates,” she said, drawing
a plateau in the air to show visually how it falls across income levels.
In preparation for a lecture on race, taxes, and Enron, Brown researched
Enron pensions as an example of corporate-sponsored pension plans—who
was eligible for a pension, who chose to participate, and how much
employees actually collected. She said racial dynamics could come factor
in since, for example, part-time employees won't necessarily be eligible
to participate in pension plans, and they may be disproportionately
minorities. Younger workers may not participate because they are more
likely to leave a job before they become eligible (five years at Enron).
So far, Brown has found that whites were most likely to be eligible
to participate in pension plans, then African-Americans, Asian-Americans,
and Hispanic-Americans, respectively. Of those eligible, 50 percent
of whites, 42 percent of Asian-Americans, 41 percent of African-Americans,
and only 25 percent of Hispanic-Americans participated. Brown said
even 50 percent is not a high rate, but “25 percent is scary.” She
wondered whether companies should be held responsible if they have
policies that hurt diversity if studies prove that diversity is valuable
and profitable for a company. Many policies that may appear neutral
to race or gender are not when seen in action, she said. “I've learned
the longer I've done this that if you stare at it long enough, something's
going to come to you.”
Regarding her marriage-penalty research, Brown said the Census data
she examined was so large—5 percent of the population—that she hasn't
yet had time to explore how such tax laws affect households of other
racial backgrounds, although she wants to study the impact on Asian-Americans
and Hispanic-Americans. “I do think that too often in this country
we tend to think in white-black terms,” she said.
An unusual convergence of people who oppose the marriage-penalty tax
as bad policy and those who want to eliminate it for social reasons
have pushed the marriage penalty to the forefront of tax reform. President
Bush minimized the marriage penalty more than the Clinton administration
did; by tinkering with the tax rates, Bush's plan allowed couples to
earn more money without being forced into a higher bracket. However,
the administration's recently proposed $1.5 billion plan to encourage
marriage doesn't address the penalty.
Brown suggested that while people thinking of getting married may
not be able to articulate how they are hurt by the marriage penalty,
they know they will pay more taxes in the end. According to economists, “at
most, the tax burden will cause a delay in marriage [couples may wait
to marry when the next tax year begins], but it won't cause people
not to marry,” she said, adding, “but I've never seen a study done
based on race.”
Until there are equal wages among the races, more African-Americans
are likely to be penalized, she said. The makeup of Congressmen's households
may also be a factor in reforming the tax.
“Until we see those families getting hit hard with the marriage penalty,
I don't think we're going to [hear] ‘let's get rid of the marriage
penalty.'”
Brown said the marriage penalty was part of a “more holistic problem
with the Internal Revenue Code that needs to be fixed.” She plans to
study other financial issues that have a similar impact, such as Social
Security, where the single wage-earner family may also benefit in some
cases over dual-income families.
“I don't care [whether you work or stay at home], I just don't think
the tax law should be taxing marriage,” she said. “Why are we seeing
Congress encourage certain marriages and discouraging others?”
• Reported by M. Wood
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