Weekend reading: Inequities in U.S. taxation and homeownership edition

This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

Shaun Harrison delves into the many ways the nation’s local, state, and federal tax systems discriminate on the basis of race and exacerbate racial income and wealth disparities. Economists Carlos Fernando Avenancio-León at Indiana University Bloomington, an Equitable Growth grantee, and Troup Howard at the University of California, Berkeley find that for homes of equal market value, homeowners of color pay an average 10 percent to 13 percent higher tax rate, within the same local property tax jurisdiction, than White homeowners. Homeowners of color who sell their homes receive lower prices due to such factors as reduced neighborhood school quality, but they pay the same property taxes because these factors are not incorporated into tax assessments. Black and Hispanic homeowners also face discrimination in assessment appeals. The Institute on Taxation and Economic Policy explains the regressivity of state sales and excise taxes. Low-income households, which are disproportionately households of color, must spend a larger share of earnings to make ends meet, thus subjecting that larger share of income to consumption taxes. Fundamental elements of income tax systems benefit well-off, mainly White, taxpayers. Tax deductions, for example, save them more money than they do lower-income taxpayers. Finally, the relative lack of wealth taxation, due to various tax preferences, further entrenches racial inequity because U.S. wealth is disproportionately owned by White families.

Aixa Alemán-Díaz and Austin Clemens summarize a new report released by UnidosUS that highlights one of the reasons for the wealth divide between Hispanic households and other households in the United States—low homeownership rates among single Latina women, compared to single White women. Although Hispanics are the fastest growing segment of the U.S. population, this group tends to face structural and systemic barriers to accessing homeownership, including structural racism, low incomes, and a lack of financial resources upon which to draw. As a result, Hispanics are less able to tap significant home-buying subsidies worth tens of billions of dollars annually. UnidosUS’s report uses data from a number of government surveys and other sources, but it notes that the existing data are insufficient: “The limitations of the sample sizes and data collection methods in federal surveys restrict disaggregated or detailed analysis of important racial and ethnic inequities at the national level.” The inadequacy of data prevents policymakers from understanding gaps in economic outcomes. To begin to address the persistent and disproportionate negative effects of economic inequality on Latinos across generations, the federal government must disaggregate economic indicators and report on disparities that marginalized populations face. 

Because the United States stands as the only advanced economy that does not guarantee paid family and medical leave to its entire workforce, millions of workers, families, and employers often lack the support they need during a family transition or health shock, including the arrival of a new child, an aging parent, a diagnosis of an illness, and personal injuries. Only 10 states and localities have implemented or begun to implement programs for their residents, so the coronavirus pandemic and recession exacerbated this national failing, creating excruciating caregiving and work-life conflicts for millions of U.S. workers. This is a critical reason that U.S. women’s labor force participation rate stood at a 33-year low in March 2021, with women of color hit the hardest. Policymakers preparing for the post-pandemic economy are proposing investments in U.S. physical and caregiving infrastructure—including paid family and medical leave, child care, and home-based health services. To assist their efforts, Equitable Growth staff have compiled a factsheet that reviews current research on—and lessons from—existing state-provided paid family and medical leave programs in the United States. Building on the evidence of the effects these programs are having on workers, families, and businesses would address one of the most pressing deficiencies in the nation’s caregiving infrastructure.

Links from around the web

“Housing segregation by race and class is a fountainhead of inequality in America,” writes Richard Kahlenberg of The Century Foundation. In a New York Times op-ed, he expresses support for national measures to bring about the reform of local zoning laws that reinforce racial and class housing segregation, noting, “Single-family exclusive zoning, which was adopted by communities shortly after the Supreme Court struck down explicit racial zoning in 1917, is what activists call the ‘new redlining.’ Racial discrimination has created an enormous wealth gap between White and Black people, and single-family-only zoning perpetuates that inequality.” While Kahlenberg endorses President Joe Biden’s proposal for federal grants to localities to end zoning measures that establish minimum lot sizes or bar multi-family housing, he urges policymakers to go further by requiring localities to begin dismantling segregation and creating a private right of action “to allow victims of economically discriminatory government zoning policies” to sue in federal court.

Facing such critical policy and enforcement questions as who is an employee and who is an employer, the U.S. Department of Labor’s Wage and Hour Division is at the center of a raging national debate and policy battlefield. Bloomberg’s Ben Penn reviews the key issues facing the agency, based on an interview with principal deputy administrator Jessica Looman, who is the agency’s acting head in the absence of a Senate-confirmed permanent administrator. The agency has already moved to repeal two rules from the previous administration that have not yet gone into effect. One would have made it easier to classify workers as independent contractors; the other would have exempted major franchisors, such as fast-food companies, from liability for wage violations committed by their franchisees. In addition, the new leadership seeks to recover from a 25-percent reduction in the agencies investigative staff to pursue employers who violate wage-hour and family-leave laws.

In an essay for Boston Review that will appear in a new book, Redesigning AI, economist Daron Acemoglu of the Massachusetts Institute of Technology calls for a rethinking of how artificial intelligence is being implemented in the workplace and society. On its current path, he writes, if AI technology continues to develop along its current path, it is likely to create social upheaval, in part for its effect on the future of jobs. AI technologies may excessively automate work, displacing workers and failing to create new opportunities to enhance productivity. It may also undermine democracy and individual freedoms. “Shared prosperity and democratic political participation do not just critically reinforce each other: they are the two backbones of our modern society,” Acemoglu writes. “Worse still, the weakening of democracy makes formulating solutions to the adverse labor market and distributional effects of AI much more difficult.” But these developments are not preordained. He suggests a number of prescriptions for redirecting AI research toward a more productive path, adjusting government funding of AI research, influencing the norms and priorities of AI researchers, and strengthening societal oversight of technologies and their applications.

Friday figure


Figure is from Equitable Growth’s Measuring what matters: Zeroing in on Latina women to address persistent low Hispanic homeownership rates in the United States.

April 23, 2021

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