Race and Local Revenue Systems (RPA Pilot / Seed Project)

The United States has significant and persistent racial disparities. Public spending and tax policies can help address these inequities. However, they may also exacerbate the problem if not carefully thought out. Despite its policy importance, our knowledge about the relationship between public finance and race is still limited. We propose the most holistic examination of this relationship up to date. First, we will explore whether primarily Black and primarily White localities raise their revenue differently. For example, are predominantly White or Black communities more likely to rely on regressive taxes, such as sales taxes? Second, we will construct measures of the community’s racial transition over the last five decades. Third, we will examine the relationship between racial change and the public finance policies adopted by the jurisdiction. To achieve these purposes, we will assemble a unique national database of the county and municipal racial composition and transition and local revenue from 1970-2020. This research will provide compelling evidence on how local tax systems advance racial justice or reinforce racial inequities across the United States. It will also inform policymakers in crafting more racially fair tax policies.