This past January, researchers uncovered that Black taxpayers are three to five times as likely to be audited as everyone else. One likely reason for this is that the IRS disproportionately audits lower-income earners who claim a tax benefit called the earned income tax credit. And this, says law professor Dorothy Brown, is just one example of the many ways that race is woven through our tax system, its history, and its enforcement. Dorothy discovered the hidden relationship between race and the tax system sort of by accident, when she was helping her parents with their tax return. The amount they paid seemed too high. Eventually, her curiosity about that observation spawned a whole area of study. This episode is a collaboration with NPR's Code Switch podcast. Host Gene Demby spoke to Dorothy Brown about how race and taxes play out in marriage, housing, and student debt. This episode was produced by James Sneed, with help from Olivia Chilkoti. It was edited by Dalia Mortada and Courtney Stein, and engineered by James Willets & Brian Jarboe. Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney. Learn more about sponsor message choices: podcastchoices.com/adchoices NPR Privacy Policy
NPR.
It is tax week in America.
And, you know, a couple of months ago, there was this pretty eye popping, troubling discovery in the world of taxes.
Mm hmm.
And it came from a study by a bunch of university researchers and a couple of people from the US Treasury Department.
I'm Dan Ho.
I'm a professor here at Stanford.
DANIEL Ho, Washington part of this team, part of this study, which decided to take a look at IR's audits, specifically.
Who the IR's audits.
And the big thing that we found in the paper, it's a really disturbing finding, is that black taxpayers are three to five times as likely to be audited as everyone else.
Three to five times more likely to be audited by the IR's if you are black.
This finding was a big deal, made headlines.
It was also a bit of a puzzle because the IR's does not collect data on taxpayer race.
They're not allowed to even do that.
We don't think that what is going on here is any evidence of explicit bias.
After all, IR's doesn't observe race and ethnicity of the taxpayer, but really stem from existing institutional priorities and selection processes for how audits get surfaced.
Specifically, this disparity has to do with something called the earned income tax credit.
The earned income tax credit is a program really meant to assist lower income wage earners, particularly lower income wage earners that have dependents.
So if you don't earn a lot of money and you have a kid, you are very likely eligible for this break on your taxes.
And the IR's does disproportionately audit this pool of taxpayers.