5 Questions with Dorothy Brown: Federal loan forgiveness a good start

September 2, 2022

Dorothy Brown was working as an investment banker on Wall Street when she noticed something puzzling: Her salary of $75,000 was about what both of her parents made together, but she paid a lot less in taxes than them.

Years later, while working as a tax professor, Brown would learn the tax code rewards households in which one person contributes significantly more to the total income. That disproportionately benefits white households, who are more likely to be in that position.

That was one of the many inequities Brown included in her 2021 book, “The Whiteness of Wealth: How the Tax System Impoverishes Black Americans – and How We Can Fix It.”

Photo of an African American woman smiling. She has on a black glasses on, a red sleeveless shirt, and a chunky gold necklace.
Dorothy Brown

There are countless examples throughout the book that debunk the idea of a color-blind tax system, something Brown herself used to think to be true. Indeed, the first sentence of the book is: “I became a tax lawyer to get away from race.”

Two of her chapters deal specifically with those tax inequities on higher education and the post-graduation labor market, so I reached out Brown to get her thoughts on the Biden administration’s announcement of loan relief. The proposal wasn’t so far off from some recommendations Brown had made in her book.

To recap, the Biden plan is to forgive $10,000 to most student-debt holders except the highest-income earners. Pell Grant recipients, who come from the lowest-income earning families, will get $20,000.

Brown, the Georgetown University Law Center Martin D. Ginsburg Chair in Taxation, answered my questions by email:

Q: In your book, you detail instance after instance of places the tax code favors wealthy, White individuals and White households. I wonder if you’re able to put into context the cost of the loan forgiveness program compared to other tax loopholes, rules and regulations. For instance, I think of the upwards of $95 billion in public subsidies we give each year to mostly large, often profitable companies in the name of economic development.

A: The cost of the loan forgiveness is very small compared to, for example, the 2017 tax cuts that increased the deficit and largely benefited the richest Americans. The loan forgiveness program on the other hand will mostly benefit the middle and working class. That is a welcome change.

Q: How would you have structured the loan forgiveness program?

A: The Biden plan is well thought out and the changes I would make would be to increase the amount of debt forgiveness. Black students are more likely to have greater debt than white students so I would have placed the debt forgiveness at up to $50,000. But the Biden administration is to be commended for their plan.

Q: In your book, you wrote that any loan forgiveness should be tax free. Some states, including Mississippi and North Carolina, are taxing it. Why should the money be tax free?

A: Because the debt forgiveness is a function of an unfair system that resulted in many borrowers paying debt, but the balance outstanding not decreasing. Given the unfairness, tax relief is something we take for granted in other instances. If someone is harmed in a car accident, any awarded damages are received tax-free. Tax law makes allowances for all kinds of harms; it seems equitable to extend that treatment to debt forgiveness. And when I think of states like Mississippi that are so cruel as to deny receipt of federal funds that would have helped with the water situation (editor’s note: Jackson, Mississippi residents have had not water for several days), I have no words. 

Q: In your book, you note that Pell Grants covered 80% of the average tuition and fees of a public four-year college; today, it covers 30%. Why has it stayed so stagnant? 

A: Congress hasn’t increased funding to keep up with skyrocketing college costs. I believe we should pay for the increased funding for Pell Grants with a tax on wealthy not-for-profit colleges as I suggest in my book, “The Whiteness of Wealth,” in Chapter 6. 

Q: The loan forgiveness has generated a lot of controversy, but it is a one-time thing. What are some changes you’d make that would address the structural problems that stand in the way of a truly equitable way of paying for and accessing higher education?

A: I would require colleges and universities to be transparent about graduation rates and student debt load by race and household. The information should be published on the school’s website and students and parents can make better informed decisions.