Dorothy Brown of the Georgetown University Law Center, a proponent of Treasury collecting race statistics to address tax code inequalities, feels seen but not heard as a member of the department's Advisory Committee on Racial Equity.
Brown, author of The Whiteness of Wealth: How the Tax System Impoverishes Black Americans — And How We Can Fix It, was one of 24 individuals chosen as part of Treasury’s newly created group, known as TACRE, and was named co-chair of its Data and Equity Research Subcommittee.
“The structure actually made sense. Having four, five members in each subcommittee allowed us to get a lot done,” Brown said, adding that her subcommittee made two recommendations: for Treasury to address racial equity in its annual green book and for Treasury and the IRS to send data to the U.S. Census Bureau to publish a comprehensive report on tax and race.
While both proposals were approved by the overall committee in March 2023 and sent to Treasury Secretary Janet Yellen for consideration, there has yet to be a response.
“Once we made our recommendations, we expected her to be transparent in her decision. That’s what we were told,” Brown said.
Brown said she confronted Yellen in a subsequent meeting in September 2023 at which she was assured that the Treasury secretary was considering the recommendations and found them to be reasonable, but a decision-making time frame wasn’t confirmed.
While the Biden administration has been keen in recent months to tout the potential effects its tax policies have had on minority groups, Brown believes Treasury is skirting around the much larger task of addressing potential systemic biases in the tax code.
‘We Deserve a Response'
“I think there’s a low priority placed on racial equity. Treasury is very good at press releases highlighting initiatives that ended up helping Black or Latino communities, but they’re not good at accountability or structural reforms. We deserve, in writing, a response” to the TACRE recommendations, Brown said.
Brown says that Treasury should be cajoled by other forces within the administration to make more tangible progress on its stated goals.
“The White House needs to step in and remind Treasury of the executive order Biden signed on addressing racial equity concerns in data,” Brown said. She wondered why someone isn't “picking up the phone and calling Secretary Yellen to say, ‘We mean it.’”
On his first day in office, President Biden signed Executive Order 13985, which called for a “whole-of-government” approach to address potential racial bias in the tax code and improve the plight of low-income communities.
A key component of Biden's order calls on Treasury to generate statistics that illustrate possible discrepancies in the outcomes of tax policies as they pertain to race and gender.
Treasury released an equity action plan in April 2022 and has published initial findings on potential links between race and the tax system. Because the IRS doesn’t collect statistics on race, Treasury developed a method of estimating the probability that a primary filer is either Black, white, or Hispanic based on other information available in the tax forms.
The Biden administration followed up with another executive order in February 2023, after a study by Stanford University’s Institute for Economic Policy Research found that Black claimants of the earned income tax credit were between 2.9 and 4.4 times more likely to be audited than non-Black claimants, mainly because of the algorithm used by the IRS.
The additional order called for the White House Office of Science and Technology Policy to submit a report every six months detailing how government agencies are combating potential biases in their statistical analyses. Also, the proclamation compels every department in the federal government to create an agency equity team tasked with developing and implementing internal policies to prevent discrimination.
IRS Commissioner Daniel Werfel responded by vowing to tweak the agency’s case selection methods and substantially reduce the number of EITC audits in a bid to address inequity concerns.
Brown argues that Werfel’s actions offer a stark contrast to what she calls a lack of urgency at Treasury.
“Frankly, the IRS has done a much better job than Treasury on this issue,” according to Brown. What helped “push the IRS in the right direction” was Senate Finance Committee Chair Ron Wyden, D-Ore., bringing up the Stanford study at Werfel’s confirmation hearing and asking for a report back within 60 days, she added.
“Treasury has not had anything that time sensitive. Think about it. TACRE wasn’t even established until October 2022. What was Treasury doing between January 2021 and then?” Brown argued.
Steven Dean of Boston University School of Law senses that the formation of TACRE “was not a means, but an end,” adding that it was Treasury’s way of “appearing to do something without actually doing anything.”
And like Brown, Dean sees the IRS announcement on a reduction in EITC audits as cosmetic rather than properly addressing the root causes of biases within the tax code.
International Visibility
Dean believes issues of racism and tax policy aren’t just in the United States but are also playing out on the international stage.
While the OECD, a group of 38 mostly rich countries, has pushed for global adoption of its tax framework, low-income countries have sought a major international tax overhaul to go through the U.N., where they would have voting rights.
The United States rejected a draft resolution introduced by Nigeria in November 2023 that created the U.N.’s own tax framework convention under the rationale that it would duplicate many of the efforts already made by the OECD. Dean, however, views the move as perpetuating a mentality that gives marginalized groups visibility but little authority.
“It really underscores the lack of seriousness by the Biden administration to do things differently on tax equity. Treasury should be engaging with the U.N. framework,” Dean said.
In addition to policy decisions, Dean points out that the rhetoric surrounding tax reform still carries subtle elements of racism.
“When Biden started talking about going after tax havens, he didn’t mention Ireland or Luxembourg; he focused on the Cayman Islands and Bermuda,” Dean said, referencing a speech Biden gave in April 2021.
While Biden has mentioned countries such as Ireland and Switzerland in subsequent speeches, Dean says the president’s initial emphasis on the Caribbean countries “was not a good look.”
Electoral Consequences?
Despite what he sees as a disingenuous attempt by the Biden administration to address racial inequity, Dean doesn’t believe issues of possible racism in the tax code will play a factor in determining the voting sentiment for marginalized groups come November.
“Quite frankly, tax is just not that important enough of an issue right now compared to other areas such as criminal justice reform,” Dean said.
Brown, however, predicts Biden could get into trouble over time if he appears to be taking the Black vote for granted.
“The Black vote is really what helped him win the nomination and ultimately the presidency in 2020. The fact Treasury seems to be ignoring the harm being done to Black taxpayers, this can be a problem down the line,” Brown said. “I think it is a mistake, in an election year, for Treasury to continue doing business as usual and think they’re going to get away with it. Tax policy, at the end of the day, is a civil rights issue.”
Treasury didn’t respond to a request for comment by press time.