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The Whiteness of Tax and How to Narrow the Race Gap

Posted on Dec. 8, 2021

Tax is probably not at the top of anyone’s list of the most diverse legal professions, nor should it be. 

The 2020 U.S. census revealed a more racially diverse population than was measured a decade earlier, with Black or African American individuals accounting for 12.4 percent — 14.2 percent if you include those identifying as Black or African American in combination with another racial group. But just 1.4 percent of American Bar Association Section of Taxation members identified themselves as Black or African American, according to the ABA’s "2021 Goal III Report." That’s the lowest percentage of any of the ABA’s 22 sections. 

“The contrast with other areas of the law — which have become more diverse, more progressive in different ways — is just stark,” Steven Dean of Brooklyn Law School told Tax Notes

To be sure, the legal industry as a whole isn’t performing particularly well in this regard. Just 3.3 percent of ABA lawyer members for whom data was available identified themselves as Black/African American as of August 2020, according to the 2021 goal report. In 2021 4.7 percent of all attorneys were Black — “nearly unchanged from 4.8 percent in 2011,” according to the ABA’s 2021 "Profile of the Legal Profession." “Nearly all people of color are underrepresented in the legal profession compared with their presence in the U.S. population,” it says.

White attorneys, on the other hand, remain overrepresented in the legal field compared with their representation in the general U.S. population, according to the ABA profile. In 2021 "85 percent of all lawyers were non-Hispanic whites,” compared with 60 percent of U.S. residents in 2019, it says. Race and ethnicity data were provided for 37.6 percent of ABA tax section members in the 2021 goal report and 31.6 percent identified as white/Caucasian.

There is a pay gap as well. According to Major, Lindsey & Africa’s 2020 partner compensation survey, the average compensation for respondents identifying as nonwhite was 20 percent lower than that of respondents identifying as white. 

It’s difficult to draw meaningful conclusions for the nonwhite ethnic categories precisely because there are so few nonwhite partners in big law, Jeffrey Lowe of Major, Lindsey & Africa said during a presentation of his firm’s 2020 survey in early 2021. “The fewer number of respondents, the more susceptible the numbers are to sampling variation,” he explained. 

For example, average compensation for Black respondents rose almost 80 percent, according to the 2020 survey, “but, of course, that’s almost certainly not the case,” Lowe said. It seems especially unlikely when one considers that the percentage of Black partners who said they were very satisfied with their compensation decreased by about 2 percent from 2018, he said, adding, “Clearly there’s a disconnect there.” 

The race gap in tax matters — not just for the sake of the diversity of the tax bar or the quality of legal and public services but also because the law depends on it. "Who it is that is helping to craft the law is important, and I think tax lawyers of color are underrepresented in those areas,” Alice Abreu of Temple University’s Beasley School of Law told Tax Notes. Abreu and Richard Greenstein, also a Beasley law professor, queried in their 2018 Denver Law Review article “Rebranding Tax/Increasing Diversity” whether the Tax Cuts and Jobs Act might have favored a more diverse population if the tax bar weren't so white. 

“There are more people who would make excellent tax lawyers than do it,” Dean said, singling out former Georgia House Minority Leader Stacey Abrams, a classmate of his at Yale Law School who started as a tax lawyer at Sutherland, Asbill & Brennan.

“I try to think of how more people like Stacey could be drawn into tax. . . . I think people just don’t believe that there are people like her out there,” Dean said, acknowledging that the question of how to keep the next Stacey Abrams in tax is a tough one. “It’s worth trying, because what a huge impact that could have had." 

How Did We Get Here? 

When it comes to the makeup of the tax bar, some theorize that the wealth gap begets the race gap. 

“Tax law is really a rich man’s game,” said Nikki Kerman of Venable LLP. “If I don’t have several million dollars, I don’t really need an estate plan. So I think for a lot of minorities — because of the racial wealth gap — it just never enters your stratosphere.” 

“Within the Black community, we don’t spend a whole lot of time talking about finances,” which helps explain why the wealth gap is much larger for Black families as opposed to other ethnic groups, said Beverly Winstead, who founded a tax law firm in Maryland. “We just don’t have those people in our family who will talk to us about . . . why tax is so important,” she added. 

Winstead recalled working as a teenager at Bojangles and Subway and having taxes withheld. No one in her circle suggested that she file for a refund or file exempt. “I think about all the refunds I never got,” she said. 

At the law school level, the racial wealth gap can be a barrier to entry, “so you already are having a pipeline issue,” Kerman said. Once admitted — possibly as first-generation law students without much exposure to the legal profession — minority students may have access to fewer resources like mentors and assistance, so “it’s harder to crack the top 10 percent,” she said. “I think it’s just a steeper hill to climb.” 

Beverly Moran of Vanderbilt Law School said a lot of minority students she’s seen over the years have come from solidly middle-income backgrounds. It’s pretty hard to get into law school without one, she said. Standardized test scores “may be highly positively correlated with income and social class, but they are even more so negatively correlated with race,” Richard Delgado of the University of Alabama School of Law observed in a 2001 U.C. Davis Law Review article.

There’s also the issue of a general lack of exposure to tax in law school. Several sources noted that an introductory tax class isn’t usually a required course. 

It was a required course for Alice Thomas, a professor at Howard University School of Law who graduated from Howard’s JD/MBA dual-degree program in 1989. The associate dean of academic affairs at the time was Alice Gresham Bullock, a Black tax attorney who went on to serve as dean of the law school from 1997 through 2002. Thomas said she was “surrounded by phenomenal men and women who all look like me, who are saying you can do or be anything you want to be — there are no limits.” 

One of Thomas’s tax professors was Loretta Argrett, who was the first African American assistant attorney general in the Justice Department Tax Division. “What a great role model, right?” Thomas said. “It was the best course ever.” 

Dean said that, being from the Bahamas, he was drawn to tax because of the global justice element. “The idea that the Bahamas is a place where, if only they would create and design and implement an income tax just like they have in the U.S., the world would be fine  — that’s just a preposterous starting point,” he said. “I had ample reason to be suspicious of the way the international tax system worked.” 

Moran said she went into tax as a race strategy. She said she realized that people who go to law school tend to fear mathematical concepts — even simple ones. “It was just a way of protecting myself a little bit and being part of a smaller group of practitioners,” she said. 

Stories like these are not the norm. Not many law students of any race start out with an interest in tax, and not all of them have high-profile role models. 

“Law students generally get a very limited view into different practice areas,” said Jessica Hough of Skadden, Arps, Slate, Meagher & Flom LLP. “We see it all the time in hiring when we’re interviewing law students and we ask them what they’re interested in, and 90 percent of them seem to say litigation because the first year in law school is really more litigation-oriented.” 

Law school is litigation-focused, Kerman agreed. “If you don’t know much about the practice of law coming in, it’s easy to get wrapped up in litigation being the main thing that lawyers do,” she said. 

There is a long history of successful and aspirational Black litigators — Thurgood Marshall being a primary example, Kerman said. Many Black students have historically attended law school with a view of bettering their communities, and litigation is often seen as the most direct way to do that — a view that’s reinforced by law schools, she said. 

Black families are often affected by social justice issues, Winstead said. “Somebody’s been locked up in the family, or we have a friend that was wrongly convicted, and so it’s those things that resonate with us,” she said. 

Tax, however, has a reputation for having little to do with social justice. “If tax is seen as a field concerned only with the value of raising revenue, it is likely to attract a more uniform group of individuals than if it is seen as a field concerned with multiple values, including social justice values,” Abreu and Greenstein noted in their article.

“I went to law school to try to figure out how to right wrongs that I had seen, and, certainly, tax had nothing to do with that,” Abreu told Tax Notes. She said that if she hadn’t taken a tax class or had a professor who was able to bring out the social dimensions of the tax system, “heaven forbid . . . I wouldn’t have been a tax lawyer.” 

“If you’re a law student interested in justice and your first year you take criminal and constitutional law, you’re done, right? You are never going to find your way to tax,” Dean said. “There’s just no way we’re ever going to win that popularity contest for folks who want to make good trouble.” 

Even setting aside students going into direct-action justice work, tax can be viewed as limiting for Black law students picturing long-term careers in the private sector, Dean said. “If you’re uncertain about how this white-shoe law firm thing will go as a young Black person, it would seem risky to close doors," he said, adding that tax, as opposed to practice areas like corporate law or litigation, "is often seen as closing doors.” 

The risk of things going wrong and being left without options “feels different, I think, if you’re Black,” Dean said. “To go into tax as a Black person, you truly have to be a true believer.” 

After Law School 

“The numbers bear out that underrepresented minorities are not staying in the profession,” said former EY partner Angela Spencer-James. In 2020 the proportion of Black or African American associates topped 5 percent, a record high, according to the National Association for Law Placement’s 2020 "Report on Diversity in U.S. Law Firms." The proportion of Black or African American partners was less than half of that at just over 2 percent. 

Kerman said some of the theories about women's minority status in the senior ranks of the profession also apply to racial minorities — the perception that it’s an old boys' club, for example. “It’s largely white male conservatives,” she said. 

Spencer-James, who was at EY for 27 years, said that early in her career, she didn’t get the best assignments, and that she’s experienced a host of microaggressions. “Many times I would feel quite marginalized,” she said. 

She recalled a time that a partner told her she couldn’t attend a client meeting because he hadn’t broken it to the client that she was Black. After all, he told her, she has a British accent and a European-sounding name, and he was confident that the client had no idea. 

Spencer-James said she ended up just trying to fit in to get to the next level, which isn’t something she would encourage today. “You don’t end up bringing your full self to the table when you just try to fit in,” she said. 

Also relevant to young associates’ trajectories in law firms is what happens when they inevitably mess up. “The best tax lawyers in the world were terrible when they started,” Dean said. “The question is how that unfolds.” 

When minorities make mistakes, they can be judged more harshly than their white counterparts, Kerman said. Mistakes by white associates are excused by white partners who are reminded of themselves in their junior years, while mistakes by minorities might be thought to be the result of a diversity hire, she said. 

In a study published in 2014 by consulting firm Nextions and lead researcher Arin Reeves, Nextions and five partners from different law firms drafted a memo with 22 deliberate mistakes and told 60 other partners that the memo was written by a third-year associate named Thomas Meyer, a graduate of New York University School of Law. The version of the memo received by half the partners identified Meyer as African American. The version received by the other half identified him as Caucasian. 

The test subjects, who thought they were participating in a writing competency study, gave the memo identifying Meyer as African American an average rating of 3.2 out of 5. The memo identifying Meyer as Caucasian got an average rating of 4.1. More errors were found in the memo identifying Meyer as African American, and “the qualitative comments on memos, consistently, were also more positive for the Caucasian Thomas Meyer,” the study says. 

Biases surface in recruiting as well. Lowe told Tax Notes that on more than one occasion, firm representatives have asked for help finding diverse partners, saying they didn’t care about candidates’ books of business. “We would go ahead and identify people and present them to the firm, and it was incredible how often it was followed with . . . ‘He’s great,' or 'she’s great,' 'but how much business do they have?’” he said. 

Lowe said his discouragement in those situations is inconsequential compared with that of the candidates. They have probably been through this dozens of times in their lives, he said, adding, “Some of us who have been doing this a long time are a little skeptical.” 

Some sources said their career paths in tax have felt relatively unmarked by overt racism. “To the extent there were race-related challenges, I think I was lucky in that I wasn’t aware of them,” Hough said. She attributes that partly to having graduated from a top accounting program and top law school. “It sort of opened up doors, and I could be choosy about where I went,” she said. 

Dean said that, having grown up with a white mother in the Bahamas, “the race thing was very garbled for me.” He went to fancy boarding schools and an elite college and said he never really suffered from stereotype threat. “That was not something I really internalized until later. . . . Eventually I understood the feeling when I became a practicing lawyer,” he said. “I think that’s very lucky for me because I do love tax.” 

It’s worth noting, too, that some employers have bucked the trend. As of September 2020, 14 percent of the IRS chief counsel labor force was Black, a proportion that bested that of Black employees in the civilian labor force, according to the IRS's 2020 data book. “Chief counsel’s office takes a lot of pride in being more diverse than the tax bar generally,” Abreu said. “They’re also basically the biggest tax firm in the country.” 

The Meritocracy Fallacy 

There is a school of thought that tax law is one of the legal industry’s purest meritocracies. Tax is race- and gender-blind, making it a good field for minorities, the argument goes. 

Dorothy Brown, professor of tax law and critical race theory at Emory University School of Law, said in her book The Whiteness of Wealth: How the Tax System Impoverishes Black Americans — And How We Can Fix It that she went into tax law to escape racism and assumed that race would have nothing to do with her work. She had never been more wrong, she learned. 

Spencer-James said that as she progressed in her career and became more aware of individuals who were getting ahead and those who were not, she realized that “it wasn’t about technical skills at all.” It had to do with sponsorship and advocacy — “who’s got my back and who’s going to use their political capital on my behalf,” she said. 

“We don’t all go in with eyes wide open. We bought the hype that we’re all going to be treated similarly . . . and everything’s fair,” Thomas said. “I knew the playing field was tilted a long time ago.” 

It’s true that you don’t have to be great at golf to be a successful tax partner, but the insistence that tax is a meritocracy “sounds more hostile than I think your typical white male partner means it to sound to a young Black person,” Dean said. “You have to not just simply be smart — people have to perceive you as smart.” 

It’s easy for the expertise of Black associates to be questioned in the presumed meritocracy of tax, and, to the extent that’s inevitable, all tax has to do is keep losing fights to other areas of law like criminal law and litigation, “and it’s going to remain overwhelmingly white — I mean just terrifyingly so,” Dean said. 

The Next Right Steps 

Sources offered myriad suggestions for how to improve the situation, from the addition of tax as an introductory law school course to more effective recruiting and retention efforts. Clients can apply pressure to law firms, and the firms can apply pressure to the schools they recruit from, they said. Stakeholders at all levels have roles to play. 

Tax faculties in law schools are almost universally tiny, and it’s hard to aim for racial balance in a group of one or two, but in schools with bigger tax faculties and graduate tax programs, “I think that is a place where the needle could be moved and firms could apply pressure,” Dean said. Law firms can ask tough questions about the tax faculty makeup at schools they’re hiring from, as well as what the schools are doing to make sure that faculty is racially diverse, he said. “There are tons of qualified folks out there; they just have to make the effort.” 

Thomas said that in addition to recruiting more Black faculty, law schools must be able to retain them. “You don’t want a Nikole Hannah-Jones moment on you,” she said, referring to the award-winning New York Times reporter's decision to decline a professorship at the University of North Carolina at Chapel Hill in July, after its board of trustees initially did not offer her tenure in the wake of vocal opposition from conservative donors and politicians. 

Despite the importance of role models, Moran said it’s possible to move ahead even when they’re in short supply. “Anytime you have a group that’s breaking through, they do it without role models,” she said. 

For law firms, “I do think it starts with recruiting,” Hough said. The pipeline of diverse law students is already small, and when firms are trying to identify individuals who might be interested in tax, the numbers are even lower, she said. "Trying to reach them at the law school level, I think, is critical,” Hough said, adding that it takes a one-on-one concerted effort. 

Once they’re in the door, “the most critical thing is making sure that they have the same opportunities as everybody else so they have access to quality work and they can develop relationships and feel like they’re part of the team and included, and I think that takes a level of intentionality,” Hough said. It involves not just monitoring statistics and metrics but also tracking whether individual attorneys are reaching expected competency levels and getting the right opportunities, she said, adding that a robust affinity network is also important. 

“Focusing solely on attracting this particular demographic group is an exercise in futility; it’s a waste of time” and doesn’t address sustainability, Spencer-James said. “The lack of internal metrics and internal focus is one of the reasons that the numbers are not sustainable,” she said. Unless firms are willing to focus internally, the diversity that they bring in isn’t going to be sustained in the trajectories of the firms, she said. “People don’t stay where they don’t belong, and if they do stay, they just learn to fit in,” she added. 

“The legal profession needs to do better, and I think the events of [2020] have spurred a lot of firms to take a long and hard look at what their recruiting practices are,” Kerman said, adding that if it’s not a recruiting problem, then it’s a retention problem. “Hopefully, it’s more than just lip service and firms will continue to take a look at that,” she said. 

“What tends to drive it the most is edicts from clients who tell the firms, ‘If you want to continue to receive our business, we need to see a team that looks like our team and that looks like our country,’” Lowe said. “I think most people will say that’s what tends to drive change fastest.” 

“I don’t think the race problem in tax is a function of any bad faith or any ill will or any animosity. I think it’s just a giant collective-action problem, and the question is where to stick that lever,” Dean said. “The good news is that you can do such small things and have such a big impact.” 

It’s not about blaming anybody, Thomas said. “None of us were here when this whole system got created,” but some don’t recognize that the benefits they’re enjoying today are because of that system, she said. “It’s not a question of whether or not you’re racist — are you anti-racist?” she said.

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