This Sunday, the United States observed Juneteenth for the second time as an official federal holiday. We hope that you were able to take some time over the weekend to commemorate the day and reflect on the history of our nation and our aim toward a more just society for Black Americans.
Juneteenth provides an opportunity for us all to reflect on how far we still have to go on the path to racial equity. Unfortunately, Black Americans continue to face systemic discrimination in virtually every corner and institution in America. From our schools to our courts to our healthcare systems, Black people face institutional obstacles that together make progress all the more difficult to attain.
Of all the systemic biases against Black Americans, few are as impactful as the racial wealth gap. Today, Black Americans hold nowhere near the level of wealth that white Americans do. The ratio of white-to-Black wealth in America is 6 to 1; for every dollar the average white American has, the average Black American has only 17 cents. If Black Americans held a share of national wealth in proportion to their share of the population, they would hold $12.68 trillion in total wealth. Instead, they hold only $2.54 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 wealthiest fifth.
There are a number of historical reasons why the racial wealth gap in America has grown (and continues to grow) so large. 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 for themselves and their families.
The ever-growing racial wealth gap is not just a story of enduring legacies of past wrongs, however. It is also a result of present injustices as well. There are many such injustices, but two of the most notable are our tax code and the subminimum tipped wage.
As it stands today, our tax code privileges existing wealth over labor. It taxes labor income – or income earned through work – at roughly double the rate that it does passive investment income – or income that requires 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 that puts everyone who works for a living at a disadvantage compared to the already-rich, but this bias in favor of wealth particularly hurts Black Americans who hold significantly less wealth than their white counterparts.
If that wasn’t enough, the subminimum tipped wage presents yet another systemic hurdle for Black Americans, who make up a disproportionate amount of our country’s tipped workforce. Since 1991, the subminimum tipped wage – which itself has racist origins – has stood at just $2.13 an hour. In practice, this means that workers who rely on tips – restaurant servers, bartenders, hairdressers, ride-share drivers, and more – essentially have to rely on customers’ charity to survive. This adversely impacts millions of workers of all races, leaving tipped workers significantly more likely to live in poverty than non-tipped workers, but it disproportionately affects Black and Brown people, who comprise no less than 48% of the tipped workforce in America.
It goes without saying that Congress must work to reform the tax code and abolish the subminimum tipped wage. These are not just economic justice issues – they are critically important racial justice issues as well. They should make wealthy, predominantly white investors (like many of us!) pay more taxes and give workers of all races, but particularly Black workers, more financial breathing room. They should also do away with the subminimum tipped wage once and for all and replace it with a universal minimum wage for workers of all industries that guarantees every single worker can afford their basic needs. Only then can we begin to take strides in closing the racial wealth gap and moving our nation forward in its long, slow march towards racial justice.
For too long, the American Dream has been out of reach for many Black Americans. You need wealth to build wealth in this country and, through no fault of their own, they simply have never had it. It’s time for change. Let’s use this Juneteenth to push Congress to take a first step in righting this wrong by reforming the tax code and ending the subminimum tipped wage.