Part 2: How The Racial Wealth Gap Affects Black Households Today

So, on our last blog post, Part 1 of How The Racial Wealth Gap Affects Black Households Today, we discussed the systems that were put in place, systems that continue to affect the generational wealth of Black families and the livelihood of Black households. We talked about stolen lands and entire Black communities that were destroyed, communities that, as one way, helped to pave the way for generational wealth building for white families.

With so many obstacles that were put in place to hinder not only the wealth of black households, but the generational wealth of their families after, such as prejudices built into credit scores and the challenges Black Americans face when dealing with student debt, it poses the question with the racial wealth gap being carved over centuries, is it possible to bridge the gap within our lifetime?

According to research by opinion writer for the Boston Globe, Kimberly Atkins Stohr, titled ‘We Can Solve The Racial Wealth Gap?’ the median wealth of the black family in 2019 was $24,000 and for the white family, it was $188,000.

So, How did we get here? How did the racial wealth gap grow so wide that it continues to widen and affect the black family and its wealth today?

It’s common knowledge that the wealth gap began with the institution of chattel slavery. After those enslaved were free, then we had the Jim Crow laws that made it difficult, out of reach, and often illegal for formally enslaved black people to own property. Even when some of those former barriers were ‘technically lifted’, there was redlining and neighborhood covenants, both of which we covered in our Part 1. These obstacles were put in place that made property ownership out of reach for black Americans. Now, we all understand that property ownership is the cornerstone of wealth building. It’s what we pass on to our families. Well to this day, the rate of home ownership amongst black people is much much lower than for others. There’s also employment discrimination that aids in the widening of the already wide racial wealth gap, but land ownership is the major contributor.

Continued research by Kimberly Atkin Stohr shows how (and I quote) “the racial wealth gap and the systems in place that continue to widen that gap, not affect only black people, but all people. When you look at the wealth gap and the way that it impacts Black Americans buying power, black Americans ability to participate in the economy, to grow the economy, to open businesses, to create jobs, in the last 30 years it has sapped $51 trillion dollars from the gross national product. That affects everyone from those buying groceries to wall street investors.” So, if everyone understood that there’s money to made here, not just for black people, but for everyone, then maybe more people, perhaps everyone, would be more interested in finding solutions to the racial wealth gap.

Taking a look at how there are disparities in the taxes, the Department of the Treasury released a report, Disparities in the Benefits of Tax Expenditures by Race and Ethnicity, which outlines the differences in how tax deductions impact White, Black, and Hispanic families. The results show a troubling trend: there are clear disparities in how tax benefits and expenditures impact different racial and ethnic groups, and a significant amount of tax breaks and benefits disproportionately go to White Americans.

The report concluded that no less than 90% of tax breaks for capital gains, charitable deductions, and small businesses go to White Americans, with the remaining 10% being shared among other ethnic and racial groups. Additionally, the benefits of both tax exclusions for employer-sponsored health insurance and mortgage interest deductions go predominantly to White families. These benefits make up a significant portion of tax breaks offered by the government, and their impact on the racial wealth gap cannot be understated.

 When we look at credit scores, there are many current disparities around credit scores based on how it’s used. It’s not only used to obtain loans based on a person’s credit worthiness, but it’s also used in job applications. Credit histories are used and held against Black people when there’s no reason and no proof that there’s any relationship between credit and people’s performance on the job. It’s also used for obtaining basic necessities for homeownership such as utilities, basic things that they everyone should have access to.

 When we look at homeownership, if someone has a mortgage and they pay it regularly, it’s a huge booster of one’s credit score, but at the same time, rent payments are usually not counted and there are way more black people in America who rent than who own compared to white people. So that causes a major disparity in credit scoring when you don’t have that rental history counted. So, although credit scoring is supposed to be blind and it’s supposed to be objective, in actuality, it isn’t.

Ready to learn more? Tune in to our latest chat, Episode 11: Part 2 How The Racial Wealth Gap Affects Black Households Today