A Simple Tax Case Complicated by Race

Abstract

Scholars and policymakers have begun to consider the racial inequities that are imbedded in the U.S. tax system. Most research addresses the racially inequitable design of the tax code or some of the racially inequitable practices that the I.R.S. employs to administer the code. However, virtually no scholarship discusses the role of the courts. This Article addresses that omission by using a little-known case to show that judges are not immune from allowing race to affect their judgments in tax cases and the ramifications that follow when they do so. The case involves the white builder of a segregated Black community in New Orleans called Pontchartrain Park. The builder sold some undeveloped land that was originally intended to be part of the subdivision, and the judge had to determine whether the profits from the sale had to be taxed at ordinary rates or as a long-term capital gain. Although the operative rule makes no reference to race, the judge used the racial identity of the homebuyers as a central part of his analysis. This Article examines the court’s reasoning and its implications.

Keywords: implicit bias, judicial bias, tax, racial bias