Happy Juneteenth! Today marks the third year that the United States has celebrated Juneteenth – which commemorates the final enforcement of the Emancipation Proclamation in Galveston, Texas at the end of the Civil War – as an official federal holiday.
Juneteenth is an opportunity to appreciate the progress we’ve made on the path toward racial justice over the last 159 years. In doing so, we see plainly how much longer we still have to go on that path – and what can be done to traverse as much ground as possible.
The days of slavery and Jim Crow segregation laws may be over, but Black Americans unfortunately still face social and systemic discrimination in virtually every facet of life. Be it the healthcare system, higher education, or the criminal justice system, Black people face countless obstacles that make accessing the American Dream – let alone getting by in life – uniquely challenging compared to other Americans.
Examples of racism can be so ugly that it’s easy to overlook the mundane but nefarious ways our economy has been deliberately rigged to prevent Black Americans from fully experiencing America’s economic prosperity. According to the Federal Reserve’s Survey of Consumer Finances, in 2022 the median white household in America held $285,010 in wealth while the median Black household held $44,890, resulting in a racial wealth gap of $240,120. This means that, for every $100 in wealth held by white households, Black households hold just $15.
Over the course of the pandemic, all racial and ethnic groups in America experienced increases in wealth, but white households reaped the largest rewards. Between 2019 and 2022, median Black wealth increased by $16,920 to $44,890, a 60% jump largely driven by increases in housing equity. Meanwhile, median white wealth increased by $66,870 to $285,010, largely due to increases in corporate and business equity. While this is roughly half the percentage increase (31%) that Black households experienced, white households experienced a greater wealth bump in absolute terms, and Black households’ median wealth still hasn’t reached what white households had pre-pandemic – not even by a long shot.
There are a number of historical reasons why the racial wealth gap is so large. From redlining, to blockbusting, to being written out of the post-WWII GI Bill, Black Americans were systematically locked out of opportunities to build wealth for themselves and their families for centuries, and the effects have compounded over generations.
But the racial wealth gap is not merely a story of the carryover effects of past injustices. Today, the wealth gap exists because of modern policy decisions that enable and perpetuate it. Specifically, our tax code privileges investment income over labor income.
Believe it or not, investment income is taxed at roughly half the rate of labor income. Moreover, investment income is only taxed at the time that investors decide to sell assets – which, in theory, could be never – while ordinary labor income is taxed on a regular, annual basis. This matters in the context of the racial wealth gap because the vast majority of stocks are owned by white Americans. Today, white Americans own 88.8% of all US stocks, with a total value of $35.46 trillion. Meanwhile, Black Americans own just 0.7% of stocks, with a total value of $270 billion – despite the fact that they make up 13.8% of the US population. And while it’s promising that Black Americans have made strides in homeownership, stock equity has traditionally grown faster than housing equity, which means that, as a general rule of thumb, white Americans experience wealth growth when stock prices rise, but Black Americans do not.
Professor Dorothy Brown, the Martin D. Ginsburg Chair in Taxation at Georgetown University Law Center and author of The Whiteness of Wealth: How the Tax System Impoverishes Black Americans – and How We Can Fix It, spoke about this and other ways in which the tax code disadvantages Black Americans at our 2022 conference, Oligarchs v. All of Us. You can watch Professor Brown’s remarks in full HERE.
There is plenty that can be done to shrink the ever-growing racial wealth gap. The first step lawmakers must take is to stop privileging investment wealth over work. Many of us Patriotic Millionaires are wealthy white investors. Take it from us – we’re doing just fine, and we don’t need any more tax breaks. Income is income regardless of how it is made, so there is no reason why the $70,000 that a wealthy investor makes in an afternoon from selling stock should be taxed any less than the $70,000 that a nurse makes in an entire year with blood, sweat, and tears.
President Biden has proposed raising the capital gains tax rate to equal that of labor income, which would begin to chip away at the racial wealth gap. This is just one of many tax proposals that Biden has put forth that would require billionaires and millionaires like us to start paying what we rightfully owe the country in taxes. Former President Trump, meanwhile, has shown no interest in addressing the systemic challenges – let alone the tax challenges – faced by Black Americans: the main priority of his economic agenda involves extending and expanding his 2017 tax cuts, which saw no less than 80% of its benefits flow to white households in 2018. In the end, the tax code should make it easier, not harder, for working people to build wealth and realize the American Dream for themselves and their families – and this is especially the case for people of color who have been historically disenfranchised.
There is no single or simple answer to addressing racial inequities in our society or our economy. The Patriotic Millionaires don’t pretend to have all the answers. But we do know that our tax code doesn’t have to be a snare that perpetuates the racial wealth gap. Instead, it can be used as a tool to build a more equitable, stronger, democratic country. We shouldn’t be afraid to use it as such.
We hope you have a fantastic Juneteenth!
