In response to a growing recognition of the absence of demographic data in federal datasets, including tax data, President Biden signed Executive Order 13985 in 2021, which, inter alia, established an Interagency Working Group on Equitable Data. The Treasury Department is also undertaking a comprehensive research initiative to study the relationship between the U.S. tax code and racial inequities. Senate Finance Committee Chair Ron Wyden (D-OR) has called for the IRS to collect and disclose more information relating to the tax code’s effect on different demographics because it makes no sense to blind lawmakers to the key data that would illuminate injustice in our tax laws. Those recent developments are the results of hard work by dedicated scholars like Alice Abreu, Jeremy Bearer-Friend, Dorothy Brown, Wei Cui, Steven Dean, Francine Lipman, and Goldburn Maynard. In this review, I would like to recognize Steven Dean's recent essay, Filing While Black: The Casual Racism of the Tax Law, 2022 Utah L. Rev. ___. Dean's essay is adapted from his testimony given before the Committee on Ways and Means of the U.S. House of Representatives on June 10, 2021, and was presented at the 2021 Utah Law Review Symposium, entitled #includetheirstories: Rethinking, Reimagining, and Reshaping Legal Education, for which I was an organizer. (Video clips are available here.)
In Filing While Black, Dean presents three powerful examples to enlighten the readers about the implications of the absence of demographic data on current tax administration and policy. The first example is a case decided in 1986 about Sam Gilliam, a Black abstract impressionist painter. Gilliam v. Commissioner, 51 T.C.M. (CCH) 515 (1986). Gilliam's prescription medication for his mental illness precipitated disruptive behavior on an airline flight by which he traveled for business. The incident left a bystander injured, and Gilliam was arrested and prosecuted for a criminal charge. Gilliam attempted to deduct his legal expenses for federal income tax purposes, arguing that those are business expenses. However, the IRS and the tax court determined that the expenses were "extraordinary" and therefore not deductible.
The Tax Court opinion exhaustively details Gilliam's personal and professional background and mental health treatment but never mentions his race. Indeed, many of the leading law school tax textbooks do not mention his race either. In fact, Gilliam has been taught to students in introductory law school tax classes for decades to show how bias relating to mental stability can influence courts in the treatment of taxpayers by drawing comparisons between this case and others with similar facts where "unusual" deductions were allowed. For example, the Court had allowed the deduction of legal expenses to settle the civil claims arising from a car crash that resulted in injuries to a child. Dancer v. Commissioner, 73 T.C. 1103 (1980). Another taxpayer was allowed to deduct the cost of an unsuccessful criminal defense to securities fraud charges. Commissioner v. Tellier, 383 U.S. 687 (1966). Lastly, a taxpayer was entitled to deduct expenses related to a civil settlement stemming from a criminal charge of assault with intent to rape because they were the outcome of "activities directly in the conduct of [the taxpayer's] trade or business." Clark v. Commissioner, 30 T.C. 1330 (1958).
In my professional teaching career, I have drawn comparisons between Gilliam and other cases to consider the meaning of "extraordinary" in tax law. However, I was not aware of Gilliam's race until Dean shared the story at a conference because the materials that I accessed—the Tax Court opinion and textbooks—made no mention that Gilliam was Black. Now, by virtue of Dean's essay, the tax community knows the race of Gilliam. We also know that among a group of similar cases dealing with “unusual deductions,” the only taxpayer who was denied a deduction was Black. Therefore, a bias that scholars, policymakers, teachers, and students should consider is whether Gilliam’s race played a role in causing him to receive less favorable tax treatment than others. Alas, this bias has not previously been considered because of the lack of data on race. That is why scholars like Dean argue that tax data should embrace comprehensive demographic information on race, gender, and ethnicity.
This essay offers a second example to demonstrate the importance of race in tax law. In 2000, Liberia and dozens of other small, mostly majority-Black jurisdictions were threatened with sanctions for being a tax haven by the OECD, whereas Switzerland was not. Delegate Donna Christensen of the U.S. Virgin Islands and members of the Congressional Black Caucus thought that it did not make sense to sanction those fragile countries while sparing far more prosperous countries and convinced the Treasury Secretary Paul H. O'Neill and President George W. Bush to withdraw the U.S. support for the OECD's efforts. I am less sympathetic to small island tax havens because of their critical roles in cross-border tax planning. Nevertheless, I agree with Dean's diagnosis. I have also argued that the bank secrecy policy in Switzerland and more sophisticated tax planning opportunities offered by other European countries would be far more threatening to international tax rules because international tax policymakers have not targeted those countries until recently. There are various explanations on why, but now we need to include another factor: race.
Finally, Eric Garner died in 2014 in police custody. It is common knowledge that the initial police report falsely described the arrest process but that a cellphone video revealed that an illegal chokehold killed Garner. However, fewer people know that Garner was arrested because he was suspected of selling cigarettes without legally mandated tax stamps. Tax was an important fact of this symbolic case on race and policing, but even tax experts have not paid much attention to the case from a Pigouvian tax and race perspective.
Dean concludes that racial bias may cause Black taxpayers to suffer disproportionately. The world might look different if tax policymakers consider how certain tax policies might impact Black lives. You may not agree with Dean's argument 100%. However, by agreeing or disagreeing with Dean, you would have thought about race in analyzing tax matters. That is why Dean's essay is such an outstanding piece for introducing readers to race and tax law.
Dean is an elegant writer, and this essay is no exception. Writing a review that gives such a well-written essay the praise it deserves is difficult, so if this review fails to persuade you, I encourage you to read Dean's essay, which is available here.