The racial wealth gap won’t budge: There’s a tax for that

The racial wealth gap is one of the most glaring injustices in the U.S. today.

Hundreds of years of structural and legal barriers excluded and prevented Black households from being able to accumulate and hold onto wealth — and policies continue to perpetuate those barriers today. While the civil rights movement brought changes that narrowed the gap, the last few decades piled on more laws that favor the wealthiest and widened the gap again.

We’ve seen 70 years of breakthroughs in science, academia and technology, but public policy has kept the profound racial wealth gap largely unmoved since 1950.

We know why. It began with a systemically racist past that begins with slavery and Black people being forced to serve as capital itself for a white landowning plantation class, and then later, establishing a system in which Black people were excluded from accumulating wealth and cut out from New Deal policies (especially labor laws). And it continues to this day: exclusion in access to finance, predatory financing, barriers to home ownership and the trap of low-wage employment, to name a few.

The tax system — and who it works for — also helps us understand that this inequality is by design. Scholars such as Emory Law professor Dorothy Brown have exposed how today’s tax code perpetuates the racial wealth gap through federal tax subsidies that especially benefit wealthy households, higher-income workers and those with access to tax-advantaged retirement plans. These households are disproportionately wealthy, and white.

Yet, in reality, we can design our tax system very differently — starting with the decision to tax extreme wealth, and the income generated from that wealth. And we can invest that revenue in transformational programs. The Ultra-Millionaire Tax proposal by Sen. Elizabeth Warren (D-Mass.), for example, is the kind of urgent and necessary wealth tax we need.

While Tax Day made most people think about their income more acutely, the reality is that wealth inequality in the U.S. is much more extreme than income inequality. According to one estimate, the bottom half of the population takes home 13 percent of all income in the U.S. but owns only 1.5 percent of the wealth; the top 10 percent owns 70.7 percent of the wealth.

Simply put: Wealth begets wealth; generational wealth compounds — and those who do not have access to wealth face enormous barriers in accumulating any.

This trend is rapidly accelerating, as the ultrawealthy grab new dollars. New Oxfam calculations show that for every $100 of wealth created in the last 10 years in the United States (2012-2021), $37 has gone to the richest 1 percent — while the bottom 50 percent have received just $2.

Here, race matters again. At the very top, nearly all multi-billionaires are white. And the Institute on Taxation and Economic Policy calculates that 92 percent of all wealth held by families with a net worth over $30 million is owned by white, non-Hispanic families. The average Black American household has roughly 12 cents in wealth to every dollar of white household wealth.

The Black Women’s Roundtable 2023 Report revealed that “over the course of a 40-year career, the wage gap results in a loss of nearly $400,000 for the average woman and nearly $900,000 for the average Black woman. In some areas, this disparity is even worse. For example, in the District of Columbia, the average lifetime wage loss for Black women is $2,000,000 when compared to the earnings of white men.”

A tax on extreme wealth makes sense on three levels. First, it has an immediate impact on the racial wealth gap, simply by reducing the fortunes of nearly exclusively white households.

But that alone is not enough. Oxfam, the Institute for Policy Studies and Patriotic Millionaires have calculated that a wealth tax of 2 percent on U.S. millionaires, 3 percent on those with wealth above $50 million, and 5 percent on U.S. billionaires could raise over half a trillion dollars annually.

So second, let’s invest hundreds of billions of dollars into transformative solutions that would support Black families and low-income families across the country.

For example, we can invest in baby bonds to the tune of $82 billion each year — a policy that would ensure that all young people start adulthood with access to a certain amount of wealth. A federally-funded account would invest money for every newborn, and make it available when they come of age.

We can invest in child care and families, at $24 billion a year — just imagine what it would do for low-income families to make child care affordable as well as to raise wages for the early childhood workforce, which is disproportionately women of color.

And third, wealth taxation offers another powerful tool: protection for our democracy. Wealth is power, and too much of both is held in too few hands. Martin Luther King, Jr. spoke to this when he said, “The problems of racial injustice and economic injustice cannot be solved without a radical redistribution of political and economic power.”

Our economic rules and our tax rules are not forces of nature; people design them. And they have enabled the ultrawealthy and corporations to amass so much wealth that it has become a threat to our democracy, our prosperity and our health as a society. 

But we can design it differently: Let’s tax extreme wealth. Narrow the racial wealth gap. And invest in the building blocks of a better future for all.

Gina Cummings is Oxfam America’s vice president of Advocacy, Alliances & Policy. Melanie Campbell is the president/CEO of the National Coalition of Black Civic Participation and the national convener of the Black Women’s Roundtable.