As inflation continues to impact working-class Americans across the country, reports show that Black Americans are being hit the hardest. On top of the massive economic inequalities caused by the pandemic, rising costs for housing, food, and gas are making it virtually impossible for Black communities to improve their financial conditions in material ways.
My grandfather — as a young person — met people who had been wealthy slave owners before the Civil War. It has only been a few generations since more of America’s wealth was derived from enslaved people rather than farmland or factories. We have come a long way since then.
Unfortunately, there is still a very long way to go. Black Americans continue to face systemic discrimination in virtually every corner and every institution in America. One of the most salient yet overlooked places where Black Americans encounter bias, however, is our nation’s tax code. Its preferential treatment of existing wealth over income leaves the Black community at a permanent disadvantage when compared to their significantly wealthier white counterparts.
As a result of decades of racist federal policies like redlining, Black Americans hold nowhere near the level of wealth that white Americans do. The ratio of white-to-Black wealth in America today is 6 to 1; for every dollar the average white American holds, the average black American holds only 17 cents. If Black Americans held a share of national wealth that was equal in proportion to their share of the population, they would hold $12.68 trillion in total wealth instead of $2.54 trillion, which puts the total racial wealth gap at $10.14 trillion. Unsurprisingly, this has led to a situation where Black Americans are overrepresented among the poor and underrepresented among the rich, making up 26% of the poorest fifth of the country and just 3% of the richest fifth.
With such a significant racial wealth gap, any tax policy that gives advantages to the already-rich will definitionally give a disproportionate amount of its benefits to white Americans. Our tax code currently taxes labor income at roughly double the rate that it does income from stocks, bonds, and other investments, or passive income on pre-existing wealth. And while it taxes labor income on a regular, annual basis, it only taxes investment income when investors decide to sell assets, giving them the ability to pick and choose when to pay taxes. This is a problem for everyone who needs to work for a living in America, but it particularly hurts the Black community.
The American Dream has been fading from view for a few decades as it has become harder and harder for workers to improve their lots. But the sad fact of the matter is that the American Dream has never at any point in our nation’s history been a reality for Black people. From 250 years of slavery, to 100 years of Jim Crow segregation, to decades of redlining and employment discrimination, Black Americans have time and again been locked out of critical opportunities to build wealth and realize the American Dream for themselves and their progeny.
You need wealth to build wealth in this country, and Black Americans unfortunately have never had it. And if the best way to make money is to already have money, a pre-existing wealth gap is only going to grow. As a result, the racial wealth gap has actually grown in recent years, not shrunk.
Despite the complexities of the matter, there’s one simple solution that would help address this problem. Wealthy, predominantly white investors should be asked to pay taxes just like people who work for a living while workers should be given some more financial breathing room. We should be making it easier, not harder, for Black workers (and workers of all races) to save and spend their hard-earned cash and build better lives for themselves, their families, and their communities, while asking more from the ultra-wealthy who can easily afford to pay more.
I myself am a wealthy, white investor living in the Upper East Side of Manhattan. It would be fun to think that I am where I am today because I worked hard and had some talent in my career on Wall Street. But I also recognize that my success is due to sheer luck in the skin color lottery in America. My parents were able to financially support me, in part because they had a government-subsidized mortgage in the 1960s that simply was not available to Black Americans. Now, my adult sons are today better off financially than typical Black people their age on account of the simple fact that I was born white.
It’s time we strengthen our resolve to right the wrongs of the past by reforming the tax code and removing yet another advantage rich white men like me have over the rest of the country. It is by no means the only policy solution that is needed to fill America’s $10.14 trillion racial wealth gap, but it is a crucial and necessary step to take if we want to move our country forward in its long, slow march towards racial justice.