As we continue through Black Philanthropy Month, a new Gallup poll showed Americans have diminished confidence in our country’s ability to achieve racial equity in areas like housing and employment. The results were the lowest numbers recorded since Gallup began tracking this data in the 1980s. With Black Americans being especially doubtful of equal opportunity claims, this latest survey underscores how inextricably linked racial equity is with economic inequality. If lawmakers hope to restore the American public’s faith in equal opportunity, they must tackle racial and economic justice issues in tandem—and a great place to start is the U.S. tax code.
Today the average White family has a net worth of $171,000 dollars compared to the average Black family’s net worth of just $17,150 dollars. This racial wealth gap has barely budged for over 50 years, in large part due to a key driver in our economy, the federal tax code. At its core, the tax code is built to favor wealth over work. This continues to put Black Americans at a significant disadvantage.
If the Biden administration is serious about tackling racial justice, it should prioritize bold, ambitious changes to the tax code that has long been rigged against Black families.
As a biracial person, I’ve seen firsthand how the racial wealth gap has affected my family members and this country. I’ve been very fortunate in my life and I’m lucky that I will be the first person in my family able to hand down assets to my children. But stories like mine are increasingly rare thanks to decades of the U.S. government deliberately blocking Black families from wealth-building opportunities. Whether through being denied FHA loans, GI bill benefits, or other banking and business programs, any advantage for pre-existing wealth puts Black families at a disadvantage.
Today, our tax code perpetuates obstacles for working Black families by protecting wealth and inheritances. As a recent ProPublica billionaire tax exposé revealed, the rich and powerful enjoy loopholes and lobby for special rules to avoid paying taxes. These preferences include a lower tax rate on capital gains than earned income, the carried-interest loop hole and the stepped-up basis which allow heirs to avoid paying taxes on the gains of an inherited asset. Simply put, if you earn your living through a paycheck (as many Black families do), you pay a far steeper tax rate than someone who lives off the wealth of their assets or inheritance.
Even with these privileges, many wealthy folks underpay their taxes, and do so without fear because an underfunded and understaffed IRS does not have the resources to go after individuals who can afford to fight a legal challenge. Instead, the IRS goes after a disproportionate share of those who claim the Earned Income Tax Credit, often Black working class Americans. How can we expect anyone to believe in the American Dream when the organization that is supposed to catch the cheaters lets them go while punishing those who are struggling to make ends meet?
As someone who’s relatively new to being wealthy, I’ve seen how easy it is to build wealth once you already have it. I had to work hard to get to where I am, but with policies like lower tax rates for wealth and a lack of enforcement for wealthy taxpayers, I know one of many wealthy people who receive an unfair advantage designed to help the rich stay rich. The United States has made great strides toward a country where all people are equal, but we are still far from that goal and policies like this only undermine it.
In order to fix the racial wealth gap, we need to start with our tax code. We need to make sure working people and wealthy heirs pay the same tax rate, while we close loopholes and beef up our enforcement of tax cheats. The United States took an active role in creating the racial wealth gap and it must take an active role in reducing it.
Karen Edwards is a former media-technology executive who volunteers for nonprofit media causes. She is also a member of the Patriotic Millionaires, high-net worth Americans, business leaders and investors who are united in their concern about the destabilizing concentration of wealth and power in America.
The views expressed in this article are the writer’s own.