How the U.S. Tax Code Privileges White Families

The U.S. tax code can seem like a neutral, or at least equally punishing, system. But that misses how it has privileged white people—particularly white married couples—and preserved the racial inequality that has long defined America. Take the joint return, for instance, a policy that was designed to give a tax break to married (heterosexual) couples in which only the husband worked in the paid labor market. That setup favored white couples, whose familial structure was most likely to fit its mold. And it came at the expense of Black married couples, including my parents.

That inequality flows from the joint tax return’s origins, a story that begins with an affluent couple named Henry and Charlotte Seaborn, members of the Seattle Yacht Club, who married in 1902. Henry was the vice president of a shipbuilding corporation, Skinner & Eddy, and Charlotte was a stay-at-home spouse. At the time, there was no such thing as “married filing jointly” in the way we understand it today. Each taxpayer filed his or her own return only if they had income greater than the exemption amount, which meant that Henry would file a return, but not Charlotte. By 1927, almost 98 percent of Americans paid no income tax, because their income did not exceed the exemption. The revenues needed to fund the government did not require any additional taxpayer dollars. Prior to World War II, our progressive tax system placed a target on Henry’s back.

But Henry had the wealth to do something about it, and in 1927, he and his lawyers figured out a workaround. Henry Seaborn’s taxable income for the year was $38,500 (well over $500,000 in today’s dollars), and his team came up with an idea: If he could treat half of his income as Charlotte’s, he could save $703.01 ($10,000 in today’s dollars) in taxes. Why? Because the progressive tax system taxes income at higher rates as income increases. In other words, the rate that applies to my first dollar of taxable income is lower than the rate that applies to my last. If, however, each spouse were taxed on half of Henry’s income, the rate applicable to the half now characterized as Charlotte’s would be significantly less than if it were part of Henry’s total.

Washington was a community-property state, which meant that, legally, Charlotte had a right to half of Henry’s income. So they each filed individual tax returns, with Charlotte claiming her “half” of Henry’s income on hers. The IRS disapproved and said that Henry should have been taxed on all of the income, and therefore he owed the additional taxes.

Henry paid up, but then he went to court to fight. He won at the district-court level, but the IRS appealed. His case went all the way to the Supreme Court, where the Seaborns won. Their win, however, followed the loss by a different white taxpayer who tried to transfer half his income to his stay-at-home spouse by contract—not because of community-property law—and the Supreme Court ruled against him. That taxpayer loss, coupled with the Seaborns’ victory, meant that now the tax liability for married couples would turn on whether they lived in a community-property state.