U.S. society is awakening to the ways that systemic racism plays out in our policing and criminal justice system. What does it look like in our economy?
A keyindicator is the racial wealth divide –the differences in savings, homeownership and other assets between whites, blacks and Latinos (data on Asian and Native Americans still lags to get good long-term pictures).
Wealth is where the past shows up in the present, where the multi-generational legacy of racial discrimination in asset-building is reflected in people’s bank accounts and monthly expenses.
Over the last thirty years, the racial wealth divide has grown. If average Black wealth grows at the same rate it has over the last thirty years, it will be 228 years before it equals the amount of wealth possessed by white households today, according to a report I co-authored, Ever Growing Gap. This is only 17 years shorter than the institution of slavery in the U.S., which lasted 245 years. For Latinos, it will take 84 years.
Of course, we don’t want white wealth to remain stagnant for two centuries. This is just a way to dramatize how entrenched these racial inequities are. Without a course correction, thirty years from now, when the majority of the U.S. population will be people of color, the racial wealth divide between whites and Latinos and Blacks will double to an average of over $1 million.
How do we fix this? A good starting point is to redirect the billions in subsidies we currently spend to promote wealth building. For decades, the U.S. government has invested billions in the form of tax breaks to encourage retirement saving, homeownership, college plans, and other asset-building. Over the last 20 years, we’ve spent over $8 trillion, with $660 billion alone in 2015. Most of these tax breaks go to the “already haves.” A millionaire gets $145,000 in public tax benefits to expand their wealth, while working families get an average of $174.
The Home Mortgage Interest Deduction was established to encourage homeownership, but the bulk of the subsidy goes to millionaires for their first and second mansions. Let’s redirect “mansion subsidy” funds to support those who have been systematically excluded by past wealth-building investments, such as first time homebuyers.