Closing the Racial Wealth Gap

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The racial wealth gap has gotten so wide that if the average wealth of black families continues to grow at the same pace it has over the last 30 years and the average wealth of white families remained stagnant, black families would still need a stunning 228 years to amass the same amount of wealth that the average white family has today. For Latino families, the picture isn’t much better: it would take 84 years for a Latino family’s average wealth to match average wealth of white families. The goal of wealth equality in America is a long way off, and according to a recent Institute for Policy Studies report, if no action is taken on the racial wealth gap, it may never close.

The primary way to build wealth in the United States is through homeownership, and the federal government spends billions of dollars on mortgage interest deductions. But for decades, discriminatory housing policies essentially prevented families of color from buying homes, so they did not benefit from the attendant wealth creation effects. Today, only 41 percent of black households own their homes, compared to 71 percent of white families.

While closing the gap may seem like a daunting task, there are steps lawmakers can take to deal with the disparities. In the post-World War II era, the U.S. government created programs offering tax benefits that helped white families buy homes in order to create wealth and programs like the G.I. Bill that enabled war veterans to receive a college education—which is why changing the trajectory of the wealth gap doesn’t need to rely on radical reforms. “[Those government programs] had huge and multigenerational benefits,” says Chuck Collins, one of the authors of the Institute’s “The Ever-Growing Gap” study. “A modest adjustment even would make a huge difference.”

Moreover, most tax benefits go to wealthy Americans. According to the institute’s report, the typical millionaire receives $145,000 in public tax benefits while the average working family receives a scant $174. But it’s not only ultra-wealthy whites who benefit from tax policies: The vast majority of white families in every income bracket benefit from tax breaks.

Reforming tax policies that largely benefit the wealthy such as capital gains, which are taxed at a lower rate than ordinary income, can help in closing the gap. The progressive wing of the Democratic Party brought the conversation about wealth inequity into mainstream politics, and Collins believes that the American people are poised to build a movement in the coming years that can address the racial wealth gap in a more concrete way. “The things that Bernie Sanders talked about have kind of supercharged the conversation about the racial wealth divide,” he says. “The base has realigned, but it’s not reflected in our politics.” He hopes that the Democratic Party continues to shift leftward and supports candidates who reflect where the public is on the racial wealth divide and other economic inequality issues.

However, electing progressive lawmakers who embrace these issues wouldn’t be an easy task. “I think we have some work to do on the narrative,” says Collins. He believes that there are still many people, most of them white, who benefitted from government programs who believe that they succeeded merely on their own merit. “There needs to be some truth-telling in how these disparities emerged,” says Collins. “The racial wealth divide is not an accident.”

 

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