Racial wealth disparity has plagued America since its inception, fueled by a history of slavery and perpetuated by Jim Crow laws and racially driven practices that have created a massive wealth gap. But while the problem is well documented, few workable solutions have materialized.
The 2022 ABA Annual Meeting Showcase program “The Forgotten 40 Acres: Repairing Racial Wealth Disparity Using the Estate Tax and New Charitable Incentives,” featured a panel of experts who discussed the history of broken promises made by the government as well as new approaches to the idea of making reparations.
Estate planning lawyer Sarah Moore Johnson, a partner at the law firm Birchstone Moore in Washington, D.C., has studied the issue extensively and served as moderator. She gave a historical recap of how we got where we are and the failed efforts to address the problem effectively, pointing out that much of this history is not covered in schools.
The summary included the Port Royal Experiment, the grant of 40 tillable acres to each freed slave family issued by Gen. William Tecumseh Sherman in 1865, near the end of the Civil War. President Andrew Johnson’s subsequent reversal of Sherman’s order was a significant blow to wealth-creating opportunities for the formerly enslaved. The federal government later denied additional wealth-creation opportunities for Black Americans through the New Deal and the G.I. Bill, which granted home ownership opportunities and incentives to white Americans, but not their Black counterparts.
Legislation to create a commission to study reparations was first introduced by the late U.S. Rep. John Conyers of Michigan in 1989 but did not pass. The bill, HR 40, has been introduced in every Congress since, and in April 2021, the version sponsored by U.S. Rep. Sheila Jackson Lee of Texas was voted out of committee for the first time in its history. It now has a chance to be voted on by the House of Representatives. HR 40 would establish a commission to study a national apology and reparations for slavery, racial and economic discrimination, and the impact on living African Americans.
Tax attorney Raymond C. Odom, senior vice president of the Northern Trust Co. in Chicago, noted that HR 40’s basis can be founded in the “5 Rs” used in South Africa: Restitution; Rehabilitation; Restoration of Dignity; Reassurance of Non-Repetition; and Racial Reconciliation. Odom stressed the importance of Reassurance of Non-Repetition as being critical to success in the process.
Donald K. Tamaki, senior counsel at Minami Tamaki LLP in San Francisco and a member of the California Reparations Task Force, was involved in the case that led to reparations for Japanese American citizens. His parents had been unjustly interred by the U.S. government during World War II. The Civil Liberties Act of 1988, in which Congress apologized on behalf of the nation for the internment camps, directed reparations payments of $20,000 each to former internees. The U.S. would eventually pay $1.6 billion in reparations to 82,219 formerly interned Japanese Americans.
The racial wealth gap in our country is well-documented. Since the Reagan-era tax cuts were implemented in the 1980s, median net worth among Black families has been stuck at $8,000 to $24,000. Meanwhile, White household median net worth grew from $124,600 in 1992 to $189,100 in 2019, adjusting for inflation.
Tonia Wellons, president and CEO of the Greater Washington Community Foundation, explained how “the racial wealth gap will not close itself.” She stated that the gap represents “the greatest manifestation of systemic racism and the greatest opportunity for reparation.” She believes a privately funded reparations program could successfully lift Black communities and affected individuals.
While the problem is evident, the solution is not. Questions over who should receive reparations, how they should be distributed and how they can be funded are all questions of debate.
Odom and Johnson suggested funding reparations through the federal estate tax and proposing new charitable incentives, including a new type of charitable organization called a “501(c)(40) Reparations Organization.” It would provide increased tax incentives to create a private-public partnership for repairing the racial wealth gap and allow wealthy donors to be tax-motivated to contribute to Black reparations without social objection.
Odom talked about the need to tax “swollen wealth” and how, in the past, before it was whittled away, the estate and gift taxes were very effective at closing the wealth gap.
By using the estate tax to fund reparations, Johnson and Odom believe the country can pivot away from the continuing racial wealth divide. “The dispersion of wealth brings equitability,” Odom said. Only then, can America shift to the egalitarian promise of Thomas Jefferson, where every person begins life’s journey from the same starting line.