Disparate Racial Impact: Tax Expenditure Reform Needed

Abstract

Although U.S. federal tax laws don't have explicit difference in rules by race, the outcomes of those facially race-neutral rules can have differential effects across racial groups. The article analyses government subsidy and incentive programs run through the tax system: tax expenditures, and how income and wealth inequalities combined with the peculiar design of certain tax expenditures provide disproportionate benefits to white households compared to Black and Hispanic households. Tax expenditures can be designed to not favor high-income and wealthy families. The article suggests eight steps to reform tax expenditures for reducing racial and income disparities. Reforming tax expenditure with the goal of reducing racial, income and wealth inequalities can be an important first step toward a more inclusive and fairer tax system.