Shining A Bright Light on the Color of Wealth

A. Mechele Dickerson* April, 2022

The Whiteness of Wealth: How the Tax System Impoverishes Black Americans—and How We Can Fix It. By Dorothy A. Brown. New York: Crown. 2021. Pp. iv, 288. $27.

Introduction

Professor Dorothy A. Brown¹ boldly asserts in The Whiteness of Wealth: How the Tax System Impoverishes Black Americans—and How We Can Fix It that “whiteness has consistently and continually played a serious role in wealth building” (p. 20). Using stories from her life and the lives of other Black taxpayers, Brown methodically exposes how the same tax laws and policies that help whites build intergenerational wealth impoverish Blacks. Although readers who lack a business or legal background may not grasp the intricate technicalities of the Internal Revenue Code sections that Brown dissects, that does not matter. The clarity of Brown’s writing, her storytelling, and vivid examples involving her parents (Miss Dottie and James) and other ordinary Black taxpayers convey complex points—think tax policy preferences for horizontal equity or the lock-in effect—with ease.

This Review examines Brown’s powerful assertion that tax policies build and protect intergenerational white wealth and exacerbate the racial wealth gap by subsidizing activities and personal choices that disproportionately benefit white taxpayers. Those stunned by the enormity of this racial wealth gap will be horrified to learn that tax policies were designed to create white wealth. Part I describes how tax policy impacts taxpayers differently throughout their lives. It begins by discussing educational tax subsidies, followed by workforce subsidies, marriage and home ownership subsidies, and inheritance subsidies. Using Whiteness of Wealth as a starting point, this Review bolsters Brown’s findings with additional data to illustrate the stark disparities embedded in and perpetuated by our tax policies.

Part II explains how Brown dismantles the traditional conservative claim that the best way for Blacks to close the racial wealth gap created by “decades of historical discrimination against [B]lack taxpayers” is to mimic white behavior (p. 215). It then explores how this hard-work trope has been misused to explain ways that financially vulnerable lower- and middle-income families across races can become and remain middle class.

I. Building and Protecting White Wealth

Whiteness of Wealth evaluates tax policies that subsidize activities that help white taxpayers amass generational wealth and, in the process, exacerbate an already enormous racial gap. According to the Federal Reserve’s 2019 Survey of Consumer Finances, white median wealth was roughly eight times the wealth of the typical Black family—$188,200 compared to $24,100.² This racial wealth gap has barely budged since the 1950s and 1960s,³ has persisted even as overall household wealth increased,⁴ and endures today because of the outsize share of white wealth.

Brown argues that federal tax policies exacerbate the racial wealth gap by ignoring “the reality of societal differences based on race” (p. 22), which are present throughout taxpayers’ lifetimes, encompassing everything from going to college, working, marrying, and buying homes (pp. 22–26). Brown contends that the taxpayers most likely to make choices that are subsidized by tax policy are white. The following sections address each of these choices and how tax policies maintain and exacerbate racial wealth gaps.

A. Subsidizing Elite Education

Whiteness of Wealth argues that tax subsidies have turned the college degree, the gateway to the middle class for lower-income children, into an unequalizer. Brown’s primary criticism is that educational tax policies allow elite⁵ public and private tax-exempt colleges and universities that sit atop the educational “pyramid” (p. 99) to avoid paying federal (and often state or local) taxes on their real property or endowment income (p. 101). These tax savings allow elite institutions to build large endowments and, as a result, spend more on financial aid and academic support.

As recent studies show, financial aid constitutes 48 percent of all endowment spending.⁶ Tax policies that subsidize elite colleges have a particularly beneficial impact on the students who attend those institutions as these students receive more generous need- and merit-based⁷ financial assistance than students at institutions with smaller (or no) endowments. This financial support reduces their college costs and helps them avoid crippling student loan debt. Whiteness of Wealth argues that these ostensibly race-neutral educational tax policies make college an unequalizer because the students who attend elite tax-subsidized universities are disproportionately white (and upper income).⁸

Black (and lower-income students) are more likely to attend schools that offer smaller (or no) financial aid awards: less-resourced, nonselective public colleges, community colleges, for-profit institutions, and chronically underfunded Historically Black Colleges and Universities (HBCUs).⁹ Students must borrow heavily to pay for a for-profit education and thus are saddled with student loan debt,¹⁰ and students at HBCUs are often charged higher interest rates on student loans compared to students at elite, tax-exempt colleges.¹¹ Black students generally borrow more to pay for college because their parents have lower overall household income and wealth.¹² Because their parents are also less likely to invest in tax-favored college accounts like 529 savings plans (pp. 119–24), it is harder for Black parents to give their children the same level of financial support as white parents.¹³ As a result, Blacks have more student loan debt than their white counterparts particularly because they are less likely to attend elite institutions with tax-subsidized endowments.

In addition to disparities in financial aid, elite institutions use their tax savings to provide enhanced academic support.¹⁴ These savings also have lifelong benefits for the predominantly white students who attend colleges with large endowments because increased spending on teaching, advising, and student outreach “tend to improve key measures of student success like graduation rates and time-to-degree.”¹⁵ Educational tax policies do more than just reduce students’ college costs and ensure timely graduation: these policies perpetuate inequities that have far-reaching intergenerational wealth effects.

Research repeatedly confirms that workers with college degrees, particularly from elite colleges,¹⁶ receive an earnings premium (i.e., higher current and lifetime wages relative to noncollege workers of the same age, gender, and race).¹⁷ In contrast, students who attend for-profits receive lower earnings than both graduates of elite colleges and of lower-cost public two-year community colleges.¹⁸ In addition, a recent report estimated that graduates of for-profits would need to earn as much as 60 percent more than community college graduates to have comparable disposable income given their higher monthly loan payments.¹⁹ These intergenerational effects fall along racial lines with students who attend predominantly white, elite institutions having on average higher lifetime earnings in comparison to graduates of nonelite institutions (pp. 99–103).²⁰

Further, the average wealth for white college graduates was 7.2 times the average wealth for Black college graduates between 1992 and 2013,²¹ and wealth actually decreased for Black college graduates compared to white college graduates during this period.²² Worse yet, average wealth for white noncollege households after the Great Recession was roughly double ($64,200) that of Black households headed by college graduates ($37,600).²³ Perhaps college isn’t the great equalizer after all.

Finally, being a white college graduate increases the likelihood that one’s children will be college graduates and have higher household wealth.²⁴ For example, seven in ten children of non-Black college graduates also have a college degree compared to only one in three children of Black college graduates.²⁵ Moreover, the children of white and rich college graduates are more likely to attend elite institutions, receive an earnings premium, and amass additional household wealth than college-educated workers with noncollege parents.²⁶ While household wealth is generally higher for households with college degrees, having a college degree does not help Blacks accumulate wealth in the same way it helps whites.

As Whiteness of Wealth shows, although college degrees “generally translate into higher income,” this does not occur evenhandedly for all (p. 131). The educational tax policies that subsidize elite colleges ignore the racial reality that Blacks are less likely to benefit from these subsidies and therefore are less likely to be on track to accumulate wealth.

B. Workforce Subsidies and Wealth Building

Similar inequities persist when Blacks enter the workforce. White workers have had significant advantages in U.S. labor markets since 1619 when white Europeans chose to enslave Black people, deprive them of their earned wages, and make it impossible for them to use their income to buy property and build wealth.²⁷ Whiteness of Wealth explores the links between the past and present and contends that “[i]n the labor market, full access to government subsidies has often been preconditioned on being white” (p. 135). As Brown notes, Black workers have always been segregated into jobs with weaker labor law protections and fewer employment benefits (p. 138).

Although employers can no longer “pay [B]lack workers less [and] keep them out of jobs that could be filled by white workers” (p. 138), labor market discrimination still exists.²⁸ Whiteness of Wealth illustrates how the legacy of racist employment practices, combined with ongoing labor market discrimination, leaves Blacks disproportionately less likely to have jobs that provide nonwage, tax-subsidized benefits like health insurance, paid vacation, or matching retirement funds (chapter 4). Per Brown, it’s no accident that Blacks are less likely to have jobs with benefits, which constitute roughly one-third of compensation for higher paid employees.²⁹ She notes that “[B]lack workers were simply not considered” in the 1940s when tax laws were enacted to incentivize employers to offer retirement plans that would help workers build tax-free wealth they could use upon retirement (p. 136).

When combined with occupational segregation, tax policy contributes to disparate labor market outcomes. For example, Blacks are underrepresented in the high-wage STEM and professional occupations that typically provide tax-subsidized employee benefits³⁰ but are overrepresented in lower-wage hospitality and personal health care jobs that rarely provide these benefits.³¹ And although Black union members (like Brown’s father) and those who work in the public sector are closer to their white counterparts in terms of employee benefits, unionized manufacturing jobs and public workforces have been shrinking for decades, blocking the main path that Black workers had to workforce benefits.³² All told, occupational segregation and favorable tax policies mean that whites are more likely (80 percent) than Blacks (64 percent) to have retirement savings.³³

Whiteness of Wealth exposes an additional racial reality involving retirement savings. Even Black workers with an employer-provided retirement account are more likely to withdraw funds early or borrow against their accounts to pay current expenses (pp. 153–54). Workers who withdraw retirement funds early must declare withdrawn funds as taxable income and pay a 10 percent income tax penalty on withdrawals, which may deplete income they need in the future (p. 154). Brown offers a potential solution: extending the repeal on early retirement withdrawal penalties established under the CARES Act, an economic stimulus bill passed in response to COVID-19 that authorized early tax-free withdrawals for workers who needed money to pay for coronavirus-related expenses.³⁴

Brown advocates for a permanent repeal of early retirement penalties she deems paternalistic since they prevent workers from deciding how to use their own money (p. 159). Her main criticism of these ostensibly race-neutral penalties is that they ignore the fact that Blacks are disproportionately more likely to withdraw retirement funds early because they provide more financial assistance to their parents or poorer family members than white workers.³⁵ Brown’s argument is particularly compelling given Black households’ low emergency savings.³⁶ For example, a 2020 survey conducted during the early stages of the COVID-19 recession showed that almost three-quarters (73 percent) of Black adults lacked emergency funds to cover three months of expenses compared to less than half (47 percent) of white adults.³⁷ Repealing paternalistic withdrawal penalties would be financially beneficial for Blacks and also signal the federal government’s willingness to eradicate disparate tax policies.

C. Marriage

Marriage is an individual choice that all couples can make, and with this choice comes the ability to file a joint tax return. But despite this formally neutral playing field, Whiteness of Wealth argues that policies that lower taxes for married couples ignore the reality that, across income groups, Blacks (particularly women) have lower marriage rates and are less likely to file a joint tax return.³⁸ The inability to file jointly is like not getting a pay raise because federal tax laws impose the highest tax rates on unmarried taxpayers and married couples with coequal earners (pp. 44–47). Tax policies that express a societal preference for marriage are yet another way to reward white choices while leaving Black people behind.

Since the 1970s, people across racial and income groups have been postponing marriage.³⁹ Blacks, however, have always had lower marriage rates—beginning when enslaved Blacks could not legally marry at all—as emphasized in the highly-publicized “Moynihan Report.”⁴⁰ This 1965 report identified persistent reasons for low Black marriage rates, including that Black males have had higher unemployment and incarceration rates than other demographic groups for decades.⁴¹ Today, Black marriage rates still lag behind white rates across all income and educational levels with less than one-third of Blacks married in comparison to 54 percent of whites.⁴² Explanations for lower rates include the perception that there are fewer “marriageable” Black males⁴³ and that marriage rates increase with educational level, as Blacks have lower college graduation rates.⁴⁴

Black couples are also harmed by tax policies that lower income tax rates for married couples who earn unequal wages. This is because Black couples (like Brown’s parents) are more likely to be coequal earners while white couples are more likely to have a high-earning spouse and lower-earning (or nonworking) spouse (pp. 5, 9–10, 53). Although marriage is generally correlated with higher intergenerational wealth levels, Brown argues that marital tax policies that subsidize white choices actually make “[B]lack couples poorer” (p. 10). Her argument is bolstered by data showing that the average wealth for a single white person is 2.2 times the wealth of Black two-parent households, and Black children with married parents are less likely to be middle income (and more likely to live in poverty) than white children with married parents.⁴⁵

It is no longer tenable for policymakers to bestow benefits on married couples and pretend they are unaware that white taxpayers receive disproportionate benefits from these tax policies. To mitigate this disparity, Brown urges Congress to abandon the social preference for marriage and instead exhibit “marriage neutrality” (pp. 59–61). But this recommendation, even if warranted, conflicts with centuries of laws that embody this nation’s commitment to (heterosexual) marriage and that view marriage as being best for families and children.⁴⁶ Indeed, in addition to explicit pro-marriage laws and policies, the nation’s social welfare policies have historically penalized never-married mothers in an attempt to encourage them to marry.⁴⁷ Viewed in this light, it might seem unlikely that a departure from policies incentivizing and encouraging marriage will occur overnight. But social constructs around marriage and family life have changed dramatically over the last few decades: more people are choosing to cohabitate but not marry, to (legally) marry people of the same sex or of different races, and to have children but remain unmarried.⁴⁸ Given this seismic shift in marital preferences, laws and policies (tax or otherwise) that subsidize how people form their households should be repealed and replaced with marital-neutral policies that better reflect society today.

D. Homeownership

Like the decision to marry, anyone can choose to buy a home, and homeowners can decide where they want to live. However, the homeownership deck has always been stacked against Blacks, and Whiteness of Wealth argues that seemingly race-neutral homeownership tax policies have made it harder for Blacks to increase their housing wealth and receive the tax breaks white homeowners receive (pp. 71–72, 77).

State and federal banking and housing laws helped whites buy homes after the Depression and World War II, while redlining,⁴⁹ racist restrictive covenants,⁵⁰ and other oppressive policies made it virtually impossible for Blacks to buy homes in high-opportunity white suburban neighborhoods. For example, Blacks were denied the low-cost and low-risk federally insured mortgage loans that helped whites build housing wealth.⁵¹ By 1950, most whites (57%) owned homes at a time where the U.S. experienced a racial homeownership gap of 23%,⁵² which widened to 26% a decade later.⁵³ The legacy of racist housing and lending policies and ongoing racial discrimination⁵⁴ keep Black homeownership rates low regardless of age, income group, or education level.⁵⁵ This racial homeownership gap expanded further after the 2007–2009 Great Recession, increasing to nearly 30%,⁵⁶ and will likely continue to expand as the COVID-19 pandemic has exacerbated housing insecurity for Blacks.⁵⁷

Given these racial realities, Whiteness of Wealth criticizes an array of housing tax policies, including the mortgage interest deduction (MID) and tax provisions that let homeowners sell their homes but avoid paying taxes on profits from the sale (p. 89). Brown contends that such policies increase white wealth because whites are more likely to buy expensive homes and have enough mortgage interest to warrant itemizing deductions rather than taking the standard deduction on their income tax returns (pp. 71–74). Recent research analyzing census data confirms Brown’s claim that whites are more likely to get housing tax breaks relative to their share of the U.S. population.⁵⁸ For example, in 2018, whites comprised 66% of U.S. households but received 71% of the tax breaks provided by the MID.⁵⁹ In contrast, Blacks were 13% of U.S. households but received only 8% of the homeownership tax breaks.⁶⁰

Whiteness of Wealth rejects the notion that increasing Black homeownership rates alone will close the racial wealth gap given the challenges that Blacks face in lending, housing, and appraisal markets (chapter 2). Brown identifies a few key problems:

Blacks pay higher interest rates on mortgage loans (p. 86);
They face a higher likelihood of eventually selling their homes for a loss (pp. 80–81);
Their homes are valued less than white-owned comparable houses (p. 69); and
White avoidance or “flight” devalues Black-owned properties (p. 82).

First, a recent study found that while mortgage interest rates generally decline as the borrower’s income increases, average interest rates for Blacks who earned $100,000 or more were higher than average rates for white homeowners who earned $30,000 or less.⁶¹ In addition, the rates for higher-income white homeowners ($100,000 or more) were almost twenty-two basis points lower than the rates for Black homeowners with similar incomes; this discrepancy cannot be explained by credit or risk factors alone.⁶²

Second, because of their higher home-buying costs, Blacks had greater foreclosure and delinquency rates during the Great Recession⁶³ and mortgage loan forbearance rates during the COVID-19 recession.⁶⁴ This created what some have characterized as a “Black tax” on homeownership.⁶⁵ Similar to formal federal tax policies, this informal “Black tax” exacerbates the racial wealth gap and depletes liquid savings that Blacks could use to build wealth. Research concerning the challenges Black homeowners faced and losses suffered during the COVID-19 pandemic estimates that eliminating the “Black tax” could cut the racial retirement savings gap in half.⁶⁶

Another reason that closing the homeownership gap alone will not close the racial wealth gap is because, as Whiteness of Wealth shows, the homes Blacks buy typically have lower appraised values than white-owned homes with comparable features (p. 69). While it is illegal for appraisers to consider the race of the neighborhood or the homeowner when valuing houses, studies consistently show that homes in white neighborhoods appreciate more than comparable homes in Black, Indigenous, People of Color (BIPOC) neighborhoods because of appraisers’ “racialized assumptions” about neighborhoods.⁶⁷ This problem has actually worsened over time: Black homeowners were affected more by racially biased appraisals in 2015 than they were in 1980.⁶⁸

Racist home appraisals continued unabated throughout the COVID-19 pandemic, as evidenced by a March 2021 housing discrimination complaint. This complaint reveals that appraisers assessed a Black-owned home for $125,000 and $110,000 but then assessed the same home for $259,000 when a white friend of the owner posed as her brother during the appraisal.⁶⁹ The stubborn persistence of racial bias in the appraisal industry⁷⁰ and the wealth-stripping consequences of those biases have now caused the Biden Administration to launch an interagency effort to combat and eradicate racial inequities in the home appraisal process.⁷¹

But appraisers are not the only reason Black-owned homes are devalued. As Brown explains, whites across income groups avoid living near Blacks. Though whites contend in survey results that they prefer to live in racially diverse neighborhoods,⁷² their actions contradict their stated preferences. Indeed, they consistently choose to buy homes in non-Black neighborhoods even if the amenities in the homes in both neighborhoods are substantially similar (p. 87). They also generally flee integrating neighborhoods or refuse to buy homes in non-white neighborhoods unless those neighborhoods are gentrifying.⁷³ Like the wealth losses that racist appraisals create, white homeowners who avoid living near Blacks create what Brown and others⁷⁴ have identified as an “appreciation gap” that decreases home values in Black neighborhoods while increasing home values in white neighborhoods (pp. 81–82, 85).

Brown ultimately recommends that one of the best investment decisions for Blacks is to buy homes in white neighborhoods (p. 211). However, she acknowledges that Blacks may choose to avoid white neighborhoods for nonmonetary reasons, namely, to reduce the times they must perform “racism triage” (pp. 82, 103, 211). A 2021 report examining stress levels for Blacks who live in higher-income and predominately white neighborhoods confirms the physical and psychological risks Blacks face when they decide to live in racially hostile neighborhoods.⁷⁵ That is, while living in higher-income neighborhoods generally gives residents increased health benefits, the racism-related stress Black homeowners experience in those neighborhoods negates many of those positive health benefits.⁷⁶ So Brown’s recommendation actually presents a Catch-22; it may require Blacks to choose between financial or mental wellbeing.

E. Generational Wealth

From attending elite subsidized colleges to retiring with largely tax-free pension income, throughout their lifetimes white taxpayers reap enormous wealth benefits thanks to favorable tax policies. These benefits continue even after they die as white taxpayers can take advantage of favorable tax policies that enable them to pass wealth on to future generations. Generally speaking, households build wealth through inheritances, gifts, or disposable income, and wealth lets them participate in wealth-creating activities like purchasing homes, investing in stocks, bonds, or mutual fund accounts, and starting small businesses. Whites are more likely to receive tax-free gifts or inheritances from their families compared to Blacks,⁷⁷ and the average inheritance they receive is at least twice as large as the average inheritance for Blacks.⁷⁸ As Brown quips: “[w]hiteness itself, and the legacy of advantages that come with it, is the magnet that attracts wealth.”⁷⁹

In addition to being less likely to inherit large amounts of wealth, Blacks usually do not have the type of wealth that protects them from income shocks due to the kind of income and assets that racial groups typically maintain. For example, income for Blacks (and most lower- and middle-income workers) comes from wages whereas whites and higher-income workers are more likely to have nonwage income that comes from stock dividends or revenue from small businesses (pp. 175, 261, 262). Whites and Blacks also hold wealth in different ways.

Just over a quarter of white wealth was in stocks in 2019 while Black households held just 13% of their wealth in stocks.⁸⁰ As for total stock ownership, whites owned almost 90% of corporate equity and mutual fund shares while Blacks held 1.1%.⁸¹ White households hold only 43% of their wealth in housing, compared to the roughly 60% of wealth Blacks hold in their personal residences.⁸² Just before the Great Recession, the median wealth for Black households, excluding a home, was only $14,200 but was $92,950 for white households.⁸³ Therefore, when Blacks (even if they are higher income or college educated) lose their homes, as many did during the Great Recession, they lose the wealth they could bequeath to their children.⁸⁴

Additionally, Blacks struggle to increase their wealth through small businesses that can be passed on to heirs: only 2 percent of small businesses are Black owned despite Blacks being roughly 13 percent of the U.S. population.⁸⁵ With lower overall income and wealth, Black entrepreneurs are more likely to seek financing in capital markets than white entrepreneurs. Unfortunately, studies reveal that lenders give comparable white applicants more assistance completing loan applications than they give Blacks,⁸⁶ require Blacks to provide more personal financial information than whites,⁸⁷ discourage Blacks from applying for credit,⁸⁸ and deny Black loan applications at twice the rate of whites.⁸⁹ Lenders are also more likely to ask Blacks for information about their marital status even though federal fair lending laws (implicitly recognizing lower Black marriage rates) prevent lenders from considering the borrower’s marital status when making credit decisions.⁹⁰ This disparate treatment, which cannot be explained solely by risk factors,⁹¹ contributes to the lower rates of Black small business ownership, and in turn, a decreased likelihood they will pass on assets to their children.

The difficulties that Black entrepreneurs face in capital markets were on vivid display during the COVID-19 recession when Black businesses initially struggled to receive the forgivable loans offered by the Paycheck Protection Program (PPP).⁹² Because they were less likely to be approved for PPP loans early in the recession, failure rates (and, thus, wealth losses) for Black-owned small businesses were significantly higher (41 percent) than for white-owned small businesses (17 percent).⁹³ As a result, by the end of 2020, the white share of small business ownership was larger than before the pandemic started.⁹⁴ This business wealth helped protect whites from pandemic-related income losses and left them with wealth that they can eventually bequeath to heirs.

Because of these financing challenges, Black entrepreneurs are disproportionately more likely to use the equity in their homes to start businesses.⁹⁵ Since, as noted above, Black-owned homes have lower appreciation values than white-owned homes, Black entrepreneurs have less housing capital to use to start a small business. Additionally, because housing is the main source of Black wealth,⁹⁶ using their homes as collateral puts all of the Black entrepreneur’s wealth at risk. Everything is connected.⁹⁷

Brown begins Whiteness of Wealth by observing that “[B]lack Americans excel in spite of the roadblocks to building wealth; individual white Americans struggle in spite of their systemic advantages” (p. 23). Brown concludes the book with suggestions that could lead to more parity in federal tax policies. She calls for tax data to be published by race (pp. 202–06)—an idea that should be noncontroversial, easy to implement, and consistent with the Biden Administration’s edict to federal agencies to collect disaggregated race data to measure and advance equity.⁹⁸ Brown also proposes some “radical, hold-on-to-your-seat” changes (p. 199), including a single progressive tax rate that does not favor choices that expand the racial wealth gap (p. 206) and a reparations-type tax credit, which Brown concedes may not pass constitutional muster (pp. 216–17). Congress would almost certainly reject her reparations proposal since it annually considers (but never enacts) a bill to create a commission to merely study the possibility of reparations.⁹⁹

Before Brown proposes these radical changes, though, she eviscerates the oft-heard “blame the victim” argument that conservatives trot out, which posits that Blacks could close the racial wealth gap if they would simply “mimic white behavior” and do the same things white people do: get married, go to college, work hard, and play by the rules (p. 211). Throughout Whiteness of Wealth, Brown painstakingly exposes how tax policies make it virtually impossible for Blacks to mimic white behavior because tax policies are designed to subsidize choices Blacks simply do not make. Although Whiteness of Wealth focuses on biases against Blacks in tax laws, Brown recognizes that many of her proposed solutions (such as a wealth-based refundable tax credit for individuals with below median household wealth) could help all racial groups (pp. 220–22). Accordingly, her tax proposals that focus on class and not race might very well garner political support given the shared struggles faced by the American middle class that I describe in the following Part.

II. The Struggling American Middle Class

Many of the reasons Blacks across income groups struggle to accumulate wealth are the same reasons that lower- and middle-income families across races struggle to become and remain middle class. And the same “work hard and play by the rules” mantra regarding Black wealth that Brown debunks at the end of Whiteness of Wealth is equally ludicrous when used to explain how lower- and middle-income Americans could close income and wealth inequality gaps. This “work hard” mantra will not close the racial wealth gap given the “decades, or in some cases centuries, of opportunity that white Americans have enjoyed” (p. 198). Likewise, it will not close income and wealth inequality gaps that prevent American families of all races from buying homes, amassing retirement savings, paying college expenses for their children, or otherwise acquiring the markers of the middle class.

Discussing the financial plight of Black Americans in tandem with that of the broader American middle class reveals ways in which the tax system is stacked against both groups. One challenge with discussing middle-class economic inequality gaps is deciding whether there actually is a Black middle class, especially given the racial income and wealth gaps that exist at every age regardless of factors like marital status or college attainment level.¹⁰⁰ There is a Black middle class,¹⁰¹ but as scholars have observed, it is more fragile and unstable, much smaller, and “looks” different from the white middle class.¹⁰² For example, while 59 percent of the middle class¹⁰³ is white only 12 percent is Black.¹⁰⁴ Unlike the stereotypical Midwest middle-class manufacturing worker, middle-class Blacks are more likely to live in the South where wages are disproportionately lower.¹⁰⁵ Moreover, as a result of tax policies that favor white choices and therefore create and preserve white wealth, middle-class Black children (especially sons) are much more likely to suffer downward mobility.¹⁰⁶

Despite these differences, the Black middle class shares similarities with comparable whites through their collective struggle to make ends meet. Income inequality is at a record high, widening steadily since the 1980s, in part because the earning premium that college workers receive gives them a disproportionate share of earned income.¹⁰⁷ Wealth inequality is also at historic levels and expanded during the Recession when the top 10 percent of households had significantly smaller wealth losses than the remaining 90 percent.¹⁰⁸ Wealth shares for the top 10 percent actually increased between the start of the recession and 2013¹⁰⁹ while the middle class lost disproportionately more wealth during this time,¹¹⁰ mirroring the way that Blacks across the board suffered greater losses relative to whites.¹¹¹ By 2016, the top 1% of Americans (which includes less than 2% of Blacks) held more wealth than the entire bottom 90% of households.¹¹²

The American middle class, regardless of race, also does not own the same type of assets that rich households do,¹¹³ just as Blacks generally do not own the same type of assets as their white counterparts, discussed earlier. The data is revealing: the wealthiest Americans hold nearly half of their wealth in either businesses or real estate investments and approximately a quarter of their wealth in securities or personal trusts.¹¹⁴ By the start of 2021, when the country was still recovering from the COVID-19 recession, the wealthiest 1 percent of Americans owned more than half of the equity in corporate stock and mutual fund shares.¹¹⁵ This dataconfirms what economists have been saying for over a decade and what Brown hammers home in Whiteness of Wealth: wealth begets wealth.¹¹⁶

Just as it is impossible for Blacks to close the racial wealth gap by mimicking white behavior, middle-class families of all races cannot close the overall wealth gap by mimicking the behavior of rich people. Simply put, America’s richest families have too many generational advantages. Now is the time for America’s middle class to ignore the racial divisions being sown by some political leaders and instead unite in their demands. They must ask local and state authorities to find ways to ensure there is more affordable housing, either rented or owned. Because both racial and overall income gaps are at historic levels, income now predicts student achievement better than race.¹¹⁷ Accordingly, lower-income parents of all races should join together and demand that school districts close K-12 educational gaps, laid bare during the COVID-19 pandemic, to ensure their children can obtain the gateway to the middle class: a bachelor’s degree.¹¹⁸ Likewise, given the number of elite colleges who now admit more students from the top 1 percent than they do from the bottom 60 percent,¹¹⁹ middle- and lower-income parents must band together to demand that federal tax policies for these entities do more than continue to privilege the privileged. Finally, Black and white workers should collectively demand that businesses provide jobs with stable income and employee benefits like health insurance and retirement plans.

A racial wealth gap that “springs from foundational sources like slavery, Jim Crow, and inheritance, and . . . grows through policy choices and racialized institutions like the Tax Code, homeownership and equity, and the workplace”¹²⁰ will not close on its own. Similarly, hard work alone will not save the American middle class given the decades of neglect by local, state, and federal laws and policies. In debunking the “work hard and play by the rules” myth for Blacks, The Whiteness of Wealth also does so for a broader subset of Americans.

Conclusion

Midway through The Whiteness of Wealth, Professor Brown quotes Supreme Court Justice Brandeis: “[S]unlight is said to be the best of disinfectants” (p. 129). Brown’s book sheds a bright light on the ways tax laws impoverish Blacks while enriching whites, making it impossible for policymakers to pretend that they are unaware that the federal tax code is rife with provisions that increase white wealth. Although changing “[t]ax policy alone can’t solve the problem” (p. 202), Brown exposes the fallacy that tax laws are race neutral and explains what Congress must do if it wants to have a just and equitable federal tax system instead of one that privileges whiteness and preexisting wealth.

* University Distinguished Teaching Professor and Arthur L. Moller Chair in Bankruptcy Law and Practice, University of Texas at Austin School of Law. My thanks to Hailey Pulman for research assistance and to Brooke Simone & Aditya Vedapudi for inviting me to review this book and for their excellent and comprehensive editorial suggestions. I also thank Professor Dorothy Brown for writing a book that permanently dispels the myth that tax policy is dry, technical, and unrelated to the day-to-day lives of ordinary Americans.