July 14, 2021 1216 PM
Frederick Douglass addressed students and fellow abolitionists at Rochester’s Corinthian Hall on July 5, 1852, where he stated, “Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is an organized conspiracy to oppress, rob and degrade them, neither persons nor property will be safe.”
Earlier this month, we celebrated our country’s 245th year of independence, our collective patriotism as a nation and our appreciation for the rights afforded to us in this country; Douglass’ words could not hold more truth. For years Americans have exercised their patriotism by advocating for the lives of oppressed people by protesting economic, racial and societal injustices that stem from a financial and political system that has oppressed, degraded and robbed Black and Brown people while systematically benefiting white wealthy people like me.
Let’s take a look at the substantial racial wealth gap, for example, which paints a stark picture for the continued oppression that has held back huge swathes of the American people. Over the last 50 years, the racial wealth gap has barely budged. In 2016, the net worth of the average white family in the U.S. was $171,000, a staggering 10 times higher than the average Black family which was only $17,150. These disparities are getting bigger because of the inequities found within our tax code.
Our laws have historically given white families significant advantages over Black families. Even since the laws have been changed to be race-neutral on paper, the effects of past discrimination persist to this day. For example, Black families in many cases have been denied access to building wealth because they could not get Federal Housing Administration loans, GI bill benefits, and other banking and business programs aimed at building middle class wealth. Black families have been shut out of opportunities to acquire, build and maintain generational wealth, putting them at a huge disadvantage by a tax code that favors wealth over work.
Even in instances where high and middle income white families make the same as Black families, the white families are typically significantly wealthier due to larger inheritances of family wealth acquired through government programs that have been historically denied to Black families. Intergenerational transfers account for a large portion of the racial wealth gap.
Loopholes like the stepped-up basis preserve racial wealth inequality by allowing inheritors of large fortunes or assets to avoid paying taxes on their assets or inheritance while folks who earn a paycheck (many Black and POC families) end up paying a higher tax rate than wealthy heirs. There is a major systemic issue here. How are Black families ever supposed to catch up when the money they earn is taxed more harshly than already accumulated wealth?
We can’t just focus on eliminating unfair policies that currently exist, that’s part of how we reached our current crisis point. Instead, we should also invest in innovative policy solutions that seek to actively narrow the racial wealth gap. Proposals like the baby bonds program, introduced by Sen. Cory Booker, which would have the federal government open a $1,000 savings account for every American child at birth with additional deposits of up to $2,000 a year until a child is 18, would be a start. Imagine how that money could be used. Americans could use the money to pay for college, put a downpayment on a home, or invest it as they see fit.
If our country wants to live up to the values it was founded upon and correct the injustices that Douglass spoke about hundreds of years ago, we must prioritize bold, ambitious changes to a tax code that has long been rigged against Black and working families. The United States took an active role in creating the racial wealth gap, and it must take an active role in reducing it –– it is the most patriotic thing we can do.
Morris Pearl is the chair of the Patriotic Millionaires, former managing director at BlackRock, Inc. (the world’s largest asset management company) and current wealthy investor.