Accounting
The racial disparities in tax subsidies for homeownership
In the mid-1950s, Jessica Fulton’s grandparents moved from Mississippi to southern Illinois, where they built a new life for their family, she said at a tax policy event earlier this month.
“They created a community,” said Fulton, the vice president for policy of the
Fulton spoke as part of a program featuring
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For Black and Hispanic Americans,
In fact, one panelist suggested that the doubled standard deduction
“The disparities are just this function of not just inequality in homeownership, but also income inequality. And it’s important to keep in mind that — even among households with the same income — homeownership rates are considerably lower for minority households, if you look throughout the income distribution,” Neil Bhutta, a special advisor to the Philadelphia Fed’s
While he noted that he’s “not really a tax person” and called the persistent homeownership gaps “even within income” a puzzling problem, Bhutta said it would be difficult to imagine “being able to keep the home mortgage deduction and make it more equitable, without broader changes to the tax code and the standard deduction and things like that.”
The panelists spoke the same day that
“Although the average benefit will rise for all groups, the relative disparities will not change substantially,” they wrote. “A surprising result is that, in the top income group, Black taxpayers receive a disproportionately larger benefit relative to white taxpayers under TCJA, but that relationship will be reversed after the expiration of the individual income tax provisions.”
Regardless, the study added to a long paper trail documenting the links between the
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“If you actually are able to benefit from the home mortgage interest deduction, then you’re likely to be one who’s able to take advantage of the things that it brings,” Derrick Plummer, the director of corporate communications for online filing software firm TurboTax parent Intuit, said on the panel. “But if you are not a homeowner, if you can’t even get into homeownership, let alone be able to stay in homeownership, that might not necessarily be the case. What we also know is that our tax code is extremely complicated — more than 6,000 pages long. And what we also recognize is that
The panelists and speakers shared other tax incentives they argued may help more Americans build wealth than the mortgage interest deduction. At its root, the main issue revolves around the goal of accumulating wealth, according to Kamila Sommer, the chief of the Consumer Finance Section of the
“It is not obvious to me that we have to have explicit policies targeting, promoting homeownership,” Sommer said, noting that the higher standard deduction under the Tax Cuts and Jobs Act boosted renters’ incomes. “It does increase their savings rate and allows them to get into homeownership or accelerate or aid the transition into homeownership. The mortgage interest rate deduction — just generally how I perceive it — is that it tends to benefit existing homeowners. And it’s very well-liked, but you can have policies which help people to increase household income and help them achieve homeownership through saving and ability to qualify for mortgages.”
Tax credits for buying or building homes could hike up the share of households able to afford a home as well, according to Michael Neal, a senior fellow at the
“Certainly, the tax credit — at least the way that I read the literature — can have a relatively more powerful impact among those that have lower incomes,” Neal said. “When we think about housing supply, we are thinking about small builders, and the degree to which tax policy can certainly help to change their calculus. That could also have implications in terms of their ability to bring more affordable housing stock to market.”
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The expanded child tax credit — a pandemic-era policy that has since lapsed and
“It lowered child poverty for Black children, but it also put money in the pockets of people across race and ethnicity, and kept our economy running — like it helps people to put food on the table,” Fulton said. “I am a firm believer that if we can be really thoughtful about how we design more inclusive policies — what is it, ‘The rising tide lifts all boats’ — it’s almost like it brings all of us. So that’s been really exciting to see.”
The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.
The
- ISA 620, Using the Work of an Auditor’s Expert;
- ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
- ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
- ISRS 4400 (Revised), Agreed-upon Procedures Engagements.
The IAASB is asking for comments via a digital response template that can be found on the
In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.
President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an
The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings.
Trump has
Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.
Food prices could rise by 2.6% in the short run due to tariffs, according to an
The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.
Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist
Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time.
“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said.
One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load.
“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai.
Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies.
“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.
However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area.
“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai.
As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales.
“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai.
While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves.
“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”
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