Tax Reform

IRS Acknowledges Racial Bias In the U.S. Tax System

IRS Acknowledges Racial Bias In the U.S. Tax System

The Internal Revenue Service (IRS) has acknowledged racial bias within the existing U.S. system. 

Last week, the federal tax agency sent a letterEditSign to the Senate, noting that Black taxpayers are "three to five times more likely" to be audited than their white counterparts. The letter went on to say that IRS research, which was requested by the Senate, further suggests that the disparity is primarily driven by variances in correspondence audit rates among families who claim the Earned Income Tax Credit (EITC).  

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Photographer: Zach Gibson/Getty Images

The EITC is typically claimed by lower-income families, suggesting there is a socioeconomic component to the disparity.

IRS commissioner Daniel Werfel said he and his team are "deeply concerned" by the findings, and intend to take action to correct any disparities that currently exist. Specifically, the agency received $80 billion in additional funding this year, which Werfel says will partially go toward reforms designed to make the U.S. tax system more equitable. 

Stanford University researchers, whose work was cited in Werfel's letter to Congress, have studied race and taxes previously. The team was heavily influenced by “seminal” research by Dorothy Brown, a Black tax law professor at Georgetown University.

Brown's 2021 book, “The Whiteness of Wealth,” aims to prove that current tax laws are not race-neutral. 

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Credit: Getty Images

NBC News spoke to Brown, who told their reporters that she felt "gratified" that her personal research has made an impact. She continued:

“ I thought it was a big deal that the IRS finally acknowledged that race has played a role in their enforcement activities. They came out and validated the results of the Stanford study that showed that if you were Black and filed for the Earned Income Tax Credit you were three to five times more likely to be audited. In years past, the former IRS commissioner testified before Congress that the IRS doesn’t discriminate or treat anyone differently based on race and it’s obvious that simply isn’t true. So that this new commissioner acknowledged that is a big deal.  ”

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It is worth noting that the IRS doesn't officially collect racial data from American taxpayers. Brown supplied NBC with an explanation for this:

“ The fact of the absence of race data by the IRS doesn’t mean tax law operates in a colorblind manner. The IRS’ defense was: We couldn’t possibly be discriminating because we don’t have your race. But here’s why I never bought that: What the tax return has is ZIP code data and first and last name. If you give me a ZIP code, I can tell you racial information about who’s living there. Even though the IRS says we don’t collect race, the tax return has information that’s a pretty decent proxy for race. ”

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Credit: Getty Images

At this time, Werfel and other IRS officials have not stated what precise measures they plan to take to create a more equitable taxation system. 

It is likely that these reforms will be announced after additional research has been conducted.

What do you think about the IRS acknowledging the existence of racial bias?

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Feature Image Photographer: Zach Gibson/Getty Images

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Rebekah Barton

Rebekah Barton

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