Most of us have heard of the “Black Tax,” a shorthand reference to the ways that the structure of our society and economy imposes extra financial burdens on Black folks. It shows up even in our lovely little world of municipal finance. Black Tax: Evidence of Racial Discrimination in Municipal Borrowing Costs (Eledemire et al.) was a paper (an academic research paper, not a law review article) presented at July’s Municipal Finance Institute at the Brookings Institute. We’d recommend it for your reading. The paper’s abstract summarizes the key findings:
Municipalities with higher proportions of Black residents pay higher borrowing costs to issue rated bonds compared to other cities and counties that issue within the same state and year. These higher costs are unexplained by credit risk, more pronounced in states with higher levels of racial resentment, and robust to state-tax incentives to hold municipal bonds. . . . Collectively, the findings illustrate that racial bias can increase borrowing costs, especially where racial resentment is severe.
Heightened consciousness is an important first step. We’re not sure what we have for Step 2, but let’s think about it.