In all the discussions about the Bush tax cut, it seems no one has mentioned the issue of race. This is too bad, since more than any “diverse” Cabinet appointment, more than executive changes in affirmative action regulations, indeed more than any explicitly race-based policy, the $1.6 trillion tax reduction currently on the table will affect prospects for racial equality–for the worse. While African-Americans will be disproportionately left out of the income tax bonanza, the most troubling aspect of Bush’s proposal, from the point of view of racial equity, lies in the repeal of the estate tax.
The federal estate tax, which has been in place since 1916, affects only the richest 1.4 percent of the deceased. As the law currently stands, the first $675,000 of net estate value is exempt from tax for individuals ($1.35 million for couples). Because of a 1997 change in the law, this exemption amount will rise steadily until it reaches $1 million for individuals ($2 million for couples) in 2006. Exemptions are even higher for businesses and farms. Since the number of African-Americans who would benefit is infinitesimally small, Bush’s goal of eliminating the tax altogether would exacerbate the already growing wealth gap between blacks and whites.
In fact, if there is one statistic that captures the persistence of racial inequality in the United States, it is net worth. (If you want to know your net worth, all you have to do is add up everything you own and subtract from this figure your total amount of outstanding debt.) When we do this for white and minority households across America, incredible differences emerge: Overall, the typical white family enjoys a net worth that is more than seven times that of its black counterpart. (Latinos–a very diverse group–overall fare slightly better than African-Americans but still fall far short of whites.)
This “equity inequity,” which has grown in the decades since the civil rights triumphs of the sixties, cannot be explained by income differences alone. That is, while African-Americans do earn less than whites, asset gaps remain large even when we compare black and white families at the same income levels. For instance, at the lower end of the economic spectrum (incomes less than $15,000 per year), the median African-American family has a net worth of zero, while the equivalent white family’s net worth is $10,000. Likewise, among the often-heralded new black middle class, the typical white family earning $40,000 per year enjoys a nest egg of around $80,000; its African-American counterpart has less than half that amount. Among the wealthiest Americans, the story is much the same: Oprah Winfrey and Robert L. Johnson (founder of Black Entertainment Television) are the only African-Americans on the Forbes annual list of the 400 richest people in the United States, and they are both on the lower end of the list.
This racial wealth gap accounts for many of the racial differences in socioeconomic achievement that have persisted in the post-civil rights era. When we compare black and white families who have the same income and net worth, we find that African-American kids are more likely to graduate from high school than whites and are just as likely to complete college. And when we compare individuals who grew up in families with the same economic resources–income and wealth–we find that the wage gap between blacks and whites disappears and that African-Americans are just as likely as Anglos to be working full time. But among the poor, a lack of assets makes blacks more likely to rely on welfare.