The US tax code can appear like a neutral or at least equally punitive system. But that misses how it has privileged white people – especially white married couples – and preserved the racial inequality that has long defined America. Take, for example, the Joint Declaration, a policy aimed at giving tax breaks to married (heterosexual) couples in which only the husband worked in the paid labor market. This mindset favored white couples whose family structure best suited their form. And it was at the expense of the black couples, including my parents.
This inequality arises from the origins of the joint tax return. This story begins with a wealthy couple named Henry and Charlotte Seaborn, members of the Seattle Yacht Club, who married in 1902. Henry was vice president of a shipbuilding company, Skinner & Eddy, and Charlotte was a home-stayed wife. At that time there was no such thing as “marriage together” as we understand it today. Each taxpayer would only file their own tax return if they had income in excess of the exemption amount, which meant Henry would file a tax return but Charlotte would not. By 1927, nearly 98 percent of Americans did not pay income tax because their income did not exceed the exemption. The revenue needed to fund the government did not require additional taxpayers’ money. Before World War II, our progressive tax system put a target on Henry’s back.
But Henry had the fortune to do something about it, and in 1927 he and his lawyers found a workaround. Henry Seaborn’s annual taxable income was $ 38,500 (well over $ 500,000 in today’s dollars), and his team came up with the idea that if he could treat half of his income as Charlottes, he could be $ 703.01 ($ 10,000 in today’s dollars) in taxes save up . 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 dollar. However, if each spouse were to tax half of Henry’s income, the rate that would apply to what is now called the Charlottes’ half would be significantly lower than if it were part of Henry’s grand total.
Washington was a community owned state, which meant that Charlotte was legally entitled to half of Henry’s income. So they filed individual tax returns, with Charlotte claiming “half” of Henry’s income for hers. The IRS disapproved, saying that Henry should be taxed on all income and therefore he owed the additional taxes.
Henry paid, but then went to court to fight. He won at the district court level, but the IRS appealed. His case went to the Supreme Court, where the Seaborns won. However, their victory followed the loss of another white taxpayer who tried to contract half of his income to his spouse – not under Community law – and the Supreme Court ruled against him. This loss of taxpayers, coupled with the Seaborn victory, meant that married couples’ tax liability now depends on whether they live in a jointly owned state.