Matthew Wynter, a research professor in the Stony Brook University College of Business, presented his paper, “Black Tax: Evidence of Racial Discrimination in Municipal Borrowing Costs,” at the Brookings Institute 2022 Municipal Finance Conference, held online July 18-20.
The paper, co-authored with Ashleigh Eldemire Poindexter of the University of Tennessee and Kimberly Luchtenberg of American University, shows that 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.
In time-series tests using political election periods during which racial resentment has been shown to intensify, the…
