Does the US individual income tax display systemic racism? Negative evidence from audited US federal tax return data for 1967–73

Abstract Official statistics from the US Bureau of Labor Statistics and the US Bureau of the Census have long documented differences by ethnicity in employment rates and incomes. Recently, it has been suggested that the structure of the US federal individual tax system is 'systemically racist' which we interpret to mean that the application of the Internal Revenue Code through collection of individual income taxes adversely affects African American compared to White individuals and households. This paper contributes to the public discussion of possible systemic racism in the US tax system issue by studying an unusual set of US individual income tax data. These data differ from those used in other studies in two important ways. First, race is not imputed but obtained from the administrative records of the Social Security Administration. Second, the income tax data are audited tax return data. Using these audited and administratively matched data, we estimate effective income tax functions with an explicit role for race. After accounting for the basic structure of the US tax system, we find no statistical evidence of systemic racism in the operation of the US federal individual income tax during the period under study. Our results show that once income and filing status are taken into account, the effective tax rate tax did not vary by race—a finding that remains robust across multiple checks.