Tax policy one of many approaches to address systemic racism

A protester holds a sign at Not Another Black Life rally in Toronto May 30. Demonstrations around the world are condemning systemic racism after an African-American man, George Floyd, was killed by a white police officer in Minneapolis, Minn. Jason Hargrove, flickr. 

Protests in cities across the world continue to recognize the lives of Black people killed by racial violence, calling on governments to address systematic racism.

The tax system may not be top of mind when people are getting killed because of the colour of their skin, but tax policy has a long and ugly history of oppressing minorities and perpetuating racism among other inequalities. 

American fiscal policy researcher Brakeyshia R. Samms tweeted this week, “we all know the tax system is not immune to racism,” pointing to multiple studies showing how tax policy influences racial inequality.

A number of US states like Alabama had “slave taxes” that left a permanent wound on state public finances and public services.  In 1862, Alabama also charged free black men a tax of $5 per person -- far more than the 75 cents white men were obliged to pay. 

Canada has been no stranger to racist taxes either.  In 1885, our federal parliament passed the Chinese Immigration Act, which required that all Chinese immigrants pay the “Chinese Head Tax” of $50, with the amount rising to $500 by 1903. Few could afford this tax, which was used as a tool of exclusion and oppression for decades, until it was finally repealed in 1948.

Even if some laws or taxes aren’t explicitly racist, they are often enforced in a racist and discriminatory way.  The experience of Viola Desmond, a Black Nova Scotian businesswoman who is considered Canada’s Rosa Parks, is an example.

When Desmond refused to leave a whites-only area of the Rosalind Theatre in New Glasgow, Nova Scotia in 1946, she was charged by the Nova Scotia government and convicted for tax evasion over the one cent difference in the provincial amusement tax between the seat she had paid for and the one she occupied. She was fined $20—a considerable amount at that time—for the one cent difference in taxes and spent the night in jail. In 2010 Desmond was finally granted a posthumous pardon 45 years after she died, and now she graces Canada’s $10 bill, the first woman on her own to do so. 

Desmond’s criminal conviction and punitive fine for tax evasion over one cent in taxes stands in stark contrast to what we see today -- a continued lack of conviction and prosecution of wealthy individuals and corporations for tax evasion over hundreds of millions of dollars. 

Despite some tough rhetoric from the government, not one large corporation has been criminally convicted of tax evasion for many, many years. A  2018 Auditor General report found the Canada Revenue Agency was more lenient with large corporations and wealthy individuals than with ordinary Canadians and small businesses, who are more easily intimidated. 

Regressive tax cuts and loopholes have undermined the tax system’s progressivity. In Canada, the United States and other countries around the world, those at the very top now pay a lower overall tax rate than all other income groups, including the poorest.

A recent analysis found the U.S. 2017 Tax Cuts and Jobs Act mostly benefited white families while investigations by ProPublica uncovered how tax breaks touted as investing in lower-income Black communities wound up benefiting white billionaire developers.

How tax dollars are spent also affects racial disparities. Over-policing in communities of color lead to greater incarceration of working-age Black men, studies have shown.

Anti-racism activists in Canada and across the globe are calling for police funding to be redirected to public services such as social workers and doctors who would better serve Black communities.

Canada could also afford to invest much more in programs to narrow race disparities if profitable corporations and wealthy individuals were required to pay their fair share.

The tax system should treat all citizens equally, but it often doesn’t. Studies have found the top audited regions in the U.S. are those with the highest minority populations and much like Canada’s Auditor General report on the CRA, the IRS has admitted that due to lack of funding, it is easier to audit the working poor.

As we’ve previously argued, much more work could also be done through the tax system to help Black, Indigenous, and other marginalized communities receive important government supports and benefits.

This is especially important as Canadian studies have already revealed Black communities are disproportionately more susceptible to COVID-19 and its economic effects.

Canada needs to immediately address these injustices and make longer-term reforms to our tax system so that it does better job of reducing inequalities rather than contributing to them.