Breaking the Code

By Paul Szydelko

The story of our country can be told through myriad lenses—including, believe it or not, our tax system. Unfortunately, this particular story tells of longstanding injustice, as UNLV William S. Boyd School of Law professor Francine Lipman documented in a recently published article exploring how our tax code is both a symptom and instrument of systemic racism.

Fractures in American society have been exposed this year through both the economic strain caused by the COVID-19 pandemic, as well as police violence. Lipman calls these “tipping points that have put pressure on society such that racial, systemic, and institutional injustice has become front and center.”

“Our tax systems are as old as our country, and our country was founded by slave owners,” says Lipman, who was the lead author of the article “U.S. Tax Systems Need Anti-Racist Restructuring,” which appeared in both Tax Notes Federal and Tax Notes State in August. “Embedded in the U.S. Constitution is the taxation with representation [clause] that counted Black individuals for these purposes as only three-fifths of a white person. Racism is institutionalized. It’s systemic. It’s entrenched in how we finance government and allocate resources. … We’re immersed in it, and we must step back to understand this isn’t the way it has to or should be.”

While U.S. tax laws do not explicitly mention race, Lipman contends they perpetuate and amplify many discriminatory practices that target vulnerable populations.

During her research of tax systems, Lipman reviewed income tax audit data and discovered the following: Of the top 10 U.S. counties that had the highest percentage of federal income tax audits in 2018, eight are in Mississippi, one is in Alabama, and another is in Louisiana. Collectively, Black citizens account for about 80 percent of the population in those counties, which have very high poverty rates. By comparison, the 10 U.S. counties with the lowest audit rates are on average about 90 percent white.

“These facts demand further scrutiny to ensure our federal audit system is not part of the new Jim Crow,” Lipman said. “We’re criminalizing poverty, and similar to our justice system, it’s explicitly racist.”

She is hopeful that powerful thinkers will shine a light on the role taxes play in systemic racism. The country’s changing demographics also give her optimism. To continue to stir change, she says it’s essential to educate children of the next generation and affirmatively be anti-racist. 

Lipman blends the discipline of numbers, intellectual curiosity, and a sense of empathy to understand taxes on both a macro and micro level. “While it’s very ordered and pristine and methodical, it also has a human side,” she says. After all, tax forms tell the stories of individuals—their relationships with their partners, their dependents, and their financial well-being or distress. 

As the only tax law professor at Nevada’s only law school, Lipman encourages her students to think about taxes more expansively. Not only are they taxpayers themselves, but soon they will be working for businesses that pay taxes—and eventually, they may be in positions to rewrite our tax laws.

“The study of tax laws is more animated than people, including my students, expect,” Lipman says. “I feel a great responsibility to open their minds to the way the tax system works and the way the tax system doesn’t work so that they can serve Nevadans more effectively.”