Tackling the Racial Wealth Gap
When the average white household in Virginia has more than eleven times the wealth of the average black household, something is deeply, deeply wrong.
My first taste of Virginia politics was being inspired to knock doors as a teenager to help the former capital of the Confederacy elect its first Black governor. But as powerfully as that moment pointed toward racial progress, I was acutely aware that the election of any one individual could not by itself undo the effects of racist policies, from our original sin of slavery through Jim Crow and beyond, that denied generations of non-white Virginians equal educational, employment, and financial opportunities. That legacy remains with us today, most obviously in the wide and still growing gap between the wealth of white and non-white families.
When we talk about the wealth gap, we’re not talking about luxury or riches. We’re talking about the basic building blocks of a middle class life. The money for daycare and college that sets children up to succeed in life. The ability to make a down payment on a first home, or start a small business. The savings cushion that allows people to weather layoffs or a car breakdown.
The average white household in Virginia has more than eleven times the wealth of the average black household.
Not only does the wealth gap persist, but in the last few years we’ve been going in the wrong direction. Today, the average white household in Virginia has more than eleven times the wealth of the average black household. Over the last thirty years, the average wealth of white families has grown three times faster than it has for black families. Black families nationwide saw their net worth devastated by the Great Recession, in part because they were often targeted by dishonest mortgage loans. Median net worth for black families fell 43% between 2007 and 2013, from $19,200 to just $11,000. Today, the average black family is less well off than they were a decade ago.
None of this is accidental. It’s the product of a century of policies designed to lock communities of color out of the American dream.
None of this is accidental. It’s the product of a century of policies designed to lock communities of color out of the American dream. The implementation of the G.I. Bill — that great American ticket to education, mortgages, and the middle class — systematically discriminated against black veterans. Occupations primarily held by people of color were excluded from Social Security benefits or fair labor standards protections. Redlining by the Fair Housing Administration restricted the ability of minority families to invest in homes for decades — creating lasting disparities in homeownership rates. The mortgage industry systematically targeted people of color with sub-prime interest rates and discriminatory loan deals, and the explosion of the predatory loan industry since the most recent recession has stripped wealth from communities of color and held them back.
The segregation of the Jim Crow era has been replaced by the discriminatory application of criminal justice.
At the state level, the segregation of the Jim Crow era has been replaced by the discriminatory application of criminal justice. Black men and women are pulled into the court system at rates many times higher than whites, often for minor offenses; once in, they lose voting rights and can be subject to the same discrimination in housing and hiring that our landmark civil rights legislation sought to end. Moreover, Virginia law creates a series of “poverty traps” by responding to minor offenses with fees and fines that can create a cycle of debt collection, job loss, and instability. We suspend drivers’ licenses for minor offenses or unpaid fees — and when people lose their jobs because they can’t get to work, their fees just pile up even further. We garnish wages and divert tax returns with limited assessments of whether people have any reasonable ability to pay and regardless of the impact on families. And we allow employers to use credit checks in hiring, in spite of the fact that credit has no demonstrable correlation with job performance, but does demonstrably limit the hiring of minority workers.
If we’re going to close the racial wealth gap, we have to address these problems head-on by acknowledging the role of race in economic disparities.
Discriminatory policies have been reinforced by a raft of federal and state tax policies that systematically help the rich get richer and leave low- and middle-income families behind — from tax credits for second homes to tax loopholes for billion-dollar companies. Federal and state governments spend billions in tax expenditures to help families who already have wealth build more of it; rather than helping low-income and middle-income families save for the future. This exacerbates both the racial wealth gap and inequality between white lower- and middle-class workers and the rich. And the rise of concentrated corporate power, combined with tax loopholes for bigger corporations, make it hard for smaller minority-owned businesses to compete and grow. Many of these legacy policies have increasingly exacerbated inequality within the white community, but the most pernicious impacts have been within communities of color.
There’s a tremendous amount that we can do on a state level to reverse these discriminatory trends and help families gain financial stability and economic empowerment. But if we’re going to close the racial wealth gap, we have to address these problems head-on by acknowledging the role of race in economic disparities. Here are some of the first steps we can take.
First, we need to stop making things worse.
Virginia has to get its house in order and address the state policies that make it so expensive to be poor. That means ending the practice of suspending drivers licenses for non-driving related civil offenses. It also means taking a humane and fair approach to wage garnishment, bank account freezes, and diversion of tax refunds. We need to prevent debts from piling on top of debts by ensuring that these approaches are subject to reasonable ability-to-pay determinations, and that the interest rates being collected on loans are reasonable and that no excess fees are being charged.
The state also needs to protect against predatory lending. Car-title loans and open-ended loans disproportionately strip wealth from communities of color. We need to pass legislation that lowers interest rate caps and limits the ability of fly-by-night operators to offer exploitative open-ended loans that trap people in a cycle of ever-growing debt.
But it’s not enough to just take on predatory lenders. We have to address the reasons that such loans have thrived over the last decade: they meet a widespread need for access to emergency funds that we have failed to address on a policy level, especially for people with low credit who are locked out of traditional loans. If we’re going to crack down on the worst abusers, we need to have better alternatives in place to ensure that people can still get the support they need to repair their car or keep their lights on — or better yet, that helps them to repair their credit and build their own wealth so that they never need a loan in the first place. As Governor, I’m going to challenge our own state institutions and non-profits to create innovative models for providing low-interest emergency loans, building savings and providing access to finance.
Second, we need to create the kind of jobs up and down the income scale that allow people to support a family.
That starts with raising the minimum wage to $15 an hour and stopping wage theft, which disproportionately steals from low-income workers. It also means making it easier for people to get jobs by ending the use of credit checks, which create barriers to opportunity and upward mobility, perpetuate inequality and poverty, and have no demonstrated correlation with a person’s job performance or character. Similarly, we must also support efforts to Ban the Box. And it means supporting paid family and sick leave for everyone. This is particularly important because black Virginians are more likely to live in multi-generational households that include seniors or young children — and they’re less likely to work in jobs that provide paid sick or family leave. The ability to take care of a sick child or be there for an aging parent should be a right, not a privilege reserved for those who can afford it.
In order to get people into good jobs, we need to invest in training that gives people skills that are in-demand in their communities. That’s why I was the first candidate in this race to call for two years of free community college, apprenticeships, or vocational training in order to ensure that all young people are given access to a path to the middle class instead of a path to debt and disempowerment.
Third, we need to tackle head-on the tax policies that perpetuate the wealth gap.
Under our current state income tax structure, a family making $17,001 a year pays the same rate as a family making $1 million a year. And that’s before we even start to look at the tax credits and loopholes that help the wealthy minimize their tax exposure and big corporations thrive over little ones. As Governor, I will advance tax reform so that we can cut down on the policies that are helping the wealthy pull farther away from everyone else. Making the Virginia Earned Income Credit refundable is a good place to start — that way we’re ensuring that working families near the poverty line are able to get a refund each year that helps them build wealth.