Racial Disparities and the Income Tax System

Source: Tax Policy Center, January 30, 2020
The Internal Revenue Service does not ask for a tax filer’s race or ethnicity on tax forms, but that does not mean the tax system affects people of different races in the same way.

Overall, federal income taxes are progressive: people with higher incomes pay a larger share of their income in taxes than those with lower incomes, and this can help close racial income gaps.

But some tax policies can also exacerbate income and wealth inequalities stemming from long-standing discrimination in areas such as housing, education, and employment.

Using the individual income tax Form 1040 as a guide, we explore how the federal income tax code interacts with existing racial inequities.