Today, the U.S. Congress Joint Economic Committee (JEC)—led by Chairman Don Beyer (D-VA)—will hold a remote hearing titled “Examining the Racial Wealth Gap in the United States,” which explores how decades of federal policy—slavery, the Homestead Act, redlining, the Federal Aid Highway Act, exclusionary zoning, among others—created the racial wealth gap and why action is needed to improve access to wealth and capital.
Currently, white families have eight times the amount of wealth as Black families and five times the amount of wealth as Hispanic families. Because intra-family wealth transfers are the primary source of wealth for most Americans—a system perpetuated by the U.S. tax code, neither higher levels of education nor increased rates of homeownership among Blacks and Latinos are enough to close these gaps. Private markets are not enough either.
Closing the racial wealth gap is not only the right thing to do for communities that have been excluded from wealth-building programs, it’s the right thing to do for our economy. According to one report, closing the racial wealth gap would increase GDP by 4 to 6 percent by 2028.
Chairman Beyer said:
“The racial wealth gap is a pernicious problem that disproportionately affects Black and Latinos, and closing it requires a multi-pronged, multi-generational effort led by the federal government.
“We know that wealth is opportunity. It makes it easier to pursue education, buy a car or a home, even to take a chance on an idea and start a business. We also know, especially after this last year, that wealth is security. It allows families to absorb financial blows, like those experienced because of COVID-19: a medical emergency or the loss of a job.
“This means that those who are on the wrong side of the racial wealth gap do not have the opportunity or security to truly live the American dream.”
(Chairman Beyer’s opening statement is here.)
Four witnesses will testify at today’s hearing—three Democratic witnesses and one Republican witness. Democratic witnesses include Emory University law professor Dorothy A. Brown, the author of The Whiteness of Wealth: How the Tax System Impoverishes Black Americans—and How We Can Fix It, New School economics and urban policy professor Darrick Hamilton, one of the first to propose the use of “baby bonds,” and University of California, Irvine law professor Mehrsa Baradaran, the author of The Color of Money: Black Banks and the Racial Wealth Gap.
Professor Brown will focus on how tax breaks reproduce the racial wealth gap, specifically those for marriage, paying for college and gifts and inheritances, and what can be done to ensure that they don’t continue to advantage whites and disadvantage Blacks. Professor Hamilton and Professor Baradaran will focus on how the federal government created the racial wealth gap and propose a plethora of policies to close it—reparations, baby bonds, “greenlining,” a second new deal, fully funded child care, and a 21st century Homestead Act, among others.
Professor Brown wrote:
“Every year when tax returns are due, black Americans pay higher taxes than their white peers. We would never know this information however because the Internal Revenue Service does not publish statistics by race. They have published statistics by gender and age however. My book The Whiteness of Wealth: How the Tax System Impoverishes Black Americans – And How We Can Fix It, based on over two decades of research shows how tax policy advantages white Americans while disadvantaging black Americans, often when they engage in the same activity. Those additional taxes lead to fewer dollars available for saving and investing and building wealth. Tax policy contributes to the racial wealth gap.”
Professor Hamilton wrote:
“Racial Inequality and despair are not inevitable; rather they are the result of political choices. Likewise we can make different choices to achieve a more economy grounded in racial and economic justice.
“To achieve racial justice, we need an honest and sobering confession of our historical sins for slavery—a point in American history in which blacks were literally the capital assets for a white landowning plantation class—and for sharecropping, “whitecapping”, Jim Crow, and the exclusion of blacks from the New Deal and postwar polices that built an asset-based white middle class. However, acknowledgment alone will be empty if not accompanied by some form of material redress.”
Professor Baradaran wrote:
“Unless targeted by concentrated and effective public policy coordinated across federal, state, and local governments, historic injustices that created the racial wealth gap will compound the gap.
“A 2016 study glibly predicted that based on the current racial wealth gap, it would take 228 years for blacks to have as much wealth as whites today. The prediction, though grim, is based on a false assumption: that the wealth gap will naturally close over time—albeit a very long time—without intervention. In fact, as my previous research demonstrates, it is likely that the racial wealth gap will remain in place and continue to reproduce itself. In other words, if nothing changes, no amount of time will close the wealth gap because of the self-perpetuating effects of capital accumulation.”