Daniel Shaviro (NYU), Race and Class in Tax Policy Scholarship (JOTWELL) (reviewing Isabel Wilkerson, Caste: The Origins of Our Discontents (2020)).
Too much of a good thing can sometimes be not so good. A case in point is reliance on optimal income tax scholarship, dating back to James Mirrlees’ Nobel Prize-winning work, to treat the generally assumed declining marginal utility of income as the only reason (apart from egalitarian preferences) for favoring progressive tax and other fiscal policies. As I wrote in a recent book (Literature and Inequality): “Declining marginal utility is important, but it falls far short of capturing the full significance and effects of … inequality in human society. We are not just isolated consumers, growing increasingly more sated as we fill up on pizza slices, or ever more jaded as we push further towards the frontiers of fine living. Rather, we are an intensely social species, and often a rivalrous one, prone to measuring ourselves in terms of others, and often directly against others.” On that ground, if one believes (as I do) that extreme high-end inequality has pervasive adverse effects, one may reasonably support imposing tax burdens on the rich going well beyond those that would be deemed to have a positive net effect if one were focusing solely on the marginal utility of own consumption and leisure.
So far, so good. But while evaluating issues of class, tax scholars (myself included) have often given far too little distinct attention to issues of race.
Poisonously entwined though class and race are in the United States, it has become ever clearer that “racial disparities [are not just] … economic inequalities in disguise.” Thus, we should not think that “if we address class issues, we can fix racism.”
Like class issues, race issues show both the inadequacy of declining marginal utility from own consumption as a full psychological (or normative) model, and the importance of status considerations to social behavior and preferences. Racism is not just about animus, but also about the impulse to feel that one is better than other people. Understanding the impact and implications of racial, no less than class, inequality requires a broad sociological inquiry. For U.S. racism today, I know of no better recently published starting point to such an inquiry than Isabel Wilkerson’s Caste: The Origins of Our Discontents. ...
Other work further shows the interaction of tax and caste. Dorothy Brown’s work emphasizing, demonstrating, and particularizing race’s fingerprints all over U.S. tax law is especially helpful. In the wake of her important new book, The Whiteness of Wealth (which is the subject of its own forthcoming JOT), this work is finally getting the attention and influence that it deserves. She shows, for example, how tax rules concerning home ownership, retirement saving, and household or filing status both increase racial wealth disparities (adjusting for class) and reflect racial power imbalances. ...
This short review is not the right place to begin considering in depth just where a sociological grasp of racism (drawing on Wilkerson’s work), allied with an empirical understanding of how existing tax laws affect racial inequality (drawing on Brown’s work), and supplemented as well by further normative analysis, might lead the still-nascent literature on taxes and racism. But this is a key direction in which we need to go. Wilkerson and Brown have performed a huge service in helping to point the way.