Wealth Inequality Is Bad - Racial Wealth Inequality Is Worse

The United States is more unequal when it comes to wealth and income than any other developed nation, and worse than even some third-world countries. For the economy to flourish, that needs to be fixed. But as bad as the general wealth inequality is, the racial wealth inequality is much worse. 

The following is part of an excellent op-ed by the editorial board of The Washington Post:

Narrowing the U.S. wealth gap in general is important; narrowing the racial wealth gap is urgent. It is not the outcome of impersonal market forces but the legacy of oppressive policy. As a country we have already wasted too many opportunities to tackle it head-on.

It won’t be easy, in part because Supreme Court rulings have limited government’s authority to use overtly race-conscious remedies to address Black economic disadvantage. The court has held, essentially, that such measures can amount to racial discrimination against people who are not Black. This is a bitter irony given that many race-conscious policies that disadvantaged Black people were either not challenged or deemed consistent with the U.S. Constitution over the decades. Still, it is a reality that could preclude measures explicitly for the benefit of Black people.

That includes reparations, which nevertheless merit a study such as the one called for in a pending bill, H.R. 40. Even if general compensation for slavery and segregation could not be feasible, or pass muster under current constitutional law, financial restitution may be available for identifiable victims of specific contemporary injustices, analogous to payments the United States made to those of Japanese ancestry interned during World War II. There needs to be focused attention on such quietly devastating barriers to wealth-building as the prevalence of informal land title among rural Southern Black families, which The Post’s Hannah Dreier and Andrew Ba Tran documented in a recent report. This legacy of Jim Crow has cost many families government disaster relief, and sometimes their property itself.

Meanwhile, the racial wealth gap can and should be addressed through measures that are race-neutral but foreseeably bestow disproportionate benefits on people of color — thus flipping the script on past policies that were officially colorblind but favored Whites. We have mentioned some in previous editorials: direct support for first-time home buyers and for retirement savings, in place of current tax incentives that tilt toward the upper middle class; grants for college tuition in place of loans.

Each low-income child born in the United States could be staked to a federally funded $1,000 “baby bond,” with annual payments, varying by family income, added until age 18, as Sen. Cory Booker (D-N.J.) and others have advocated. Invested in safe government bonds, the money would accumulate tax-free. It could only be withdrawn for investment in further wealth-building purposes such as education, entrepreneurship or homebuying. An analysis by the financial research firm Morningstar suggests that “baby bonds” could cut the racial wealth gap in half in terms of resources available per child at age 18.

Reform of the country’s current equivalent of a wealth tax — state and local property taxes — could also foster racial equity. Recent research by finance professors Carlos Avenancio-Leon of Indiana University and Troup Howard of the University of Utah has shown that existing systems result in higher property assessment growth rates for homeowners of color relative to similarly situated White homeowners.

Unjustifiably wide though it still is, the Black-White wealth gap is narrower than it was three decades ago: Median Black household wealth was 12 percent of White in 2019, but an even lower 6 percent in 1989. The lesson is that the United States has proved capable of reducing racial wealth inequality — even during a time when it was not consciously trying to do so and, in some respects, was raising new obstacles. Think how much more progress can be achieved if the country actively pursues it.