Tax Benefits, Higher Education and Race: A Gift Tax Proposal for Direct Tuition Payments

33 Pages Posted: 14 Dec 2020 Last revised: 25 Jul 2021

See all articles by Bridget J. Crawford

Bridget J. Crawford

Pace University School of Law

Wendy C. Gerzog

University of Baltimore - School of Law

Date Written: November 9, 2020


A tax system should be fair. According to conventional wisdom, this fairness mandate means that similarly situated taxpayers should pay similar taxes. Notably absent from most discussions about tax fairness or equity is any consideration of race. This makes sense, if one focuses on the tax laws’ facial neutrality, as well as the Internal Revenue Service’s failure to collect official data about the race of taxpayers. But if one is interested in equity among taxpayers, we must also examine to what extent different groups of taxpayers benefit from a Code section that reduces their tax liability. In the context of distributional equity, race and other identity characteristics must inform any analysis. This Article intervenes in this discussion with three principal claims: one descriptive, one normative, and one utilitarian.

First, the Article uses data from the higher education sector to demonstrate that primarily wealthy, white taxpayers capture the most generous educational tax benefits. Black taxpayers appear to benefit the least from these tax provisions. Black college graduates have greater education-related debt (both in incidence and quantum) than any other group of their peers. Furthermore Black college graduates have lower average wages and higher rates of unemployment compared to their Asian, Hispanic/Latinx counterparts. Black families are the least likely to be able to contribute to a 529 college tuition savings program or to make tax-free, direct tuition payments. While Black college graduates and families can take advantage of some tax benefits for higher education, the greatest tax expenditures are for those that benefit whites.

The Article next argues that achieving a more racially just society requires attention to the ways that tax laws exacerbate existing race-based economic inequality. This Article uses the example of the gift tax exemption for direct tuition payments to illustrate the ways that tax rules can exacerbate the racial wealth gap. In the context of any tax benefit statute, there are abundant opportunities for future research at the intersection of race and taxation. That work is made more difficult by the absence of readily available tax data on the basis of race, but other data sources can help fill the gaps.

Finally, the Article proposes a test for evaluating the distributional equity of any tax exclusion or deduction that results in an understatement of the donor’s or decedent’s transfer of wealth. Unlike a wealth transfer that is considered an item of consumption, a wealth transfer that has concomitant lifelong benefits, such as direct tuition payments for education, should not be allowed to reduce the donor’s transfer tax base. In the case of wealth transfer taxes, a particular tax benefit is inequitable if (1) it has disparate impacts on the basis of race and (2) the benefit is inconsistent with the overall policy objective of imposing a gift tax on inter vivos transfers that create substantial capital-like advantages to the donee while simultaneously reducing the value of the transferor’s estate. The gift tax exemption for direct tuition payments fails both parts of this test and should be repealed.

Keywords: race, tax, higher education, college, gift, wealth

JEL Classification: K1

Suggested Citation

Crawford, Bridget J. and Gerzog, Wendy C., Tax Benefits, Higher Education and Race: A Gift Tax Proposal for Direct Tuition Payments (November 9, 2020). University of Baltimore School of Law Legal Studies Research Paper, 73 South Carolina Law Review 783 (2021), Available at SSRN: or

Bridget J. Crawford (Contact Author)

Pace University School of Law ( email )

78 North Broadway
White Plains, NY 10603
United States

Wendy C. Gerzog

University of Baltimore - School of Law ( email )

1420 N. Charles Street
Baltimore, MD 21218
United States
410-837-4522 (Phone)

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