Taxes on the Wealthy Could Fund Reparations

The Supreme Court‘s latest attempt at forcing “colorblindness” in a society marked by racial inequality led it to gut affirmative action in higher education. But there’s still much that can be done to bridge racial economic inequality—particularly if we embrace reparations.

What’s more, we could fund those reparations by breaking up concentrated wealth in this country—and they could work together with other economic policies that would benefit Americans of every color.

The racial wealth divide between Black and white Americans is not only vast but persistent. We found in a 2020 report for the Institute for Policy Studies that the median African American household had only 6 percent of the wealth held by the median white American household.

This percentage is lower than it was four decades ago, indicating that the racial wealth divide may be growing. The root causes of this disparity are found in public policies that have perpetuated injustice—including not only slavery but also segregation, mass incarceration, housing and lending inequality, and other systemic injustices.

The growing concentration of wealth over the past four decades has been a further barrier to bridging the racial wealth divide. The wealthiest 400 billionaires in the United States, we calculated, own as much wealth as the entire African American population and a quarter of all Latinx households combined.

Public policy is responsible for creating the racial wealth divide—and public policy must be employed to rectify it. That policy will be more effective if it includes some form of reparations, such as cash payments to aid Black families in building wealth. But cash is only one piece of the puzzle.

Communities across the nation are exploring what reparations might entail.

A man checks his phone next
A man checks his phone next to a mural in the Greenwood district on the 100th anniversary of the 1921 Tulsa Massacre in Tulsa, Okla. on June 1, 2021.

One notable example is a nonbinding Draft Reparations Plan released in San Francisco, where the median Black income is a mere $31,000 compared to $116,000 for white people. The plan proposes allocating $5 million to each eligible African American resident as reparations. That figure is obviously unaffordable, particularly for a local government. But it succeeds at dramatizing the depth of the $10 trillion racial wealth divide for African Americans.

More importantly, San Francisco’s draft plan serves as a model for a comprehensive national strategy to address the Black-white racial wealth divide. It recognizes the profound scope of the divide and proposes practical steps to address various asset categories that contribute to wealth accumulation or its erosion.

To create wealth, the plan recommends providing tax relief and incentives to help grow Black-owned businesses and establishing a community land trust governed by Black residents to make housing more affordable.

The plan also includes steps to stop the erosion of Black wealth, including using land-use controls to reduce unhealthy establishments in Black communities and closing the school-to-prison pipeline, where police officers in schools send kids into the criminal justice system for routine disciplinary issues.

It’s encouraging that local communities are taking these initiatives. But these local measures would be more effective in the context of a national reparations initiative supported by the federal government. Only the federal government has the financial capacity to undertake the broad and bold endeavors necessary to address the deep-rooted issue of white socio-economic supremacy.

The federal government could also ensure that the burden of funding reparations falls on the ultra-wealthy who benefit the most from inequality—not on ordinary working taxpayers. A graduated tax on wealth and inherited assets, penalties for high-end tax evasion, and closing tax loopholes for the ultra-rich could all help finance a national Reparations Trust Fund.

Congress should also consider a range of progressive policies that would move our economy from one of increasingly concentrated wealth to greater shared prosperity, including passing Medicare for All, offering low-cost banking through the Postal Service, strengthening the minimum wage, and more. These would expand opportunity for Americans of every race while also narrowing the racial wealth divide, since Americans of color make up a larger share of low-income and asset poor people in this country.

But that won’t erase the need for reparations. To begin the journey, Congress should establish a national commission to examine the legacy of slavery and propose reparations and reconciliation programs funded by breaking up concentrated wealth in the United States.

Undoubtedly, repairing the racial wealth divide comes with a cost. However, failing to make these investments will prove even more costly. As we’ve seen for generations, that cost is borne by groups like African Americans and Native Americans, who’ve been placed at the bottom of the social order when it comes to income, wealth, homeownership, educational attainment, incarceration, and health.

It’s crucial to understand how racial wealth inequality for African Americans began with the foundation of this nation. Yet reparations should not be dismissed as an attempt to rectify history. Instead, they are a policy tool to address present-day divisions and create a better future.

Dedrick Asante-Muhammad is chief of membership, policy, and equity at the National Community Reinvestment Coalition and an associate fellow of the Institute for Policy Studies (IPS).

Chuck Collins directs the IPS Program on Inequality and co-edits They are co-authors of the 2020 IPS report Ten Solutions to Bridge the Racial Wealth Divide.

The views expressed in this article are the writers’ own.

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