Last week, someone asked presidential hopeful Beto O’Rourke how he would seek to fix economic disparity. His answer was ridiculous.
“We know from our history of redlining and excluding African Americans from the ability to build wealth through home purchases, that opportunity does not exist for much of the country.”
“What if in the tax code we did a better job of breaking down that accumulated wealth, of taxing it so it is not producing the greatest income and wealth inequality that we’ve seen in our lifetimes, unseen since the Gilded Age of the 19th century?” “What if we decided that we would use the proceeds to invest in people, in education?”
People are understanding what Beto said to mean that he would transfer wealth from rich white people to African Americans. My initial reaction to this story was to ask, “Is this fool high?”
But we should always examine an idea closely. In this case, we must look at — the veracity of the idea, the possibility of implementing the idea and the results of implementing the idea.
Consider this. African-Americans are 13% of 330 million. Opportunity can’t be judged by this small group alone. Also, none of us were alive in the 19th century, so O’Rourke bringing it up makes no sense.
In addition, since capital gains is the largest driver of income and wealth inequality — taxation is not driving its growth. Finally, we use tax proceeds on the federal and state level to invest both in people and in education.
Even though the premise expressed in Beto O’Rourke’s quote is faulty, let’s still consider if the idea is useful.
Truthfully, the only thing that can happen with this idea is national resentment. O’Rourke has forgotten millions of poor Hispanics, Native Americans, Asians and Whites. Nothing can come of this kind of discrimination except for increased mistrust of government by almost everyone.
With that in mind, the possibility of this idea becoming reality seems close to zero. Besides, this quote is just a ruse designed to reach a single demographic. Beto seems willing to say anything to try to make a headline.
We can’t ignore that our tax history really is discriminatory. Racism expressed through redlining and unfair banking practices really did exclude African Americans from the ability to build generational wealth through home purchases. In addition, on the county levels many times blacks were unfairly targeted with house tax increases based on maliciously inflated tax assessments.
But there is one place that O’Rourke is correct. Our tax system can be used to correct economic disparity. However, instead of some racially reprehensible approaches to income and wealth inequality, here are some tax initiatives that can work.
Home ownership really is a viable path to building wealth. In 2005, The president’s Advisory Panel on Federal Tax Reform recommended a 15% credit available to tax filers who hold a mortgage regardless of their itemization status. Since the mortgage interest deduction has been discontinued, now would be a perfect time to introduce the idea.
We could also use our laws to encourage use of tax incentives for corporations using minority-owned businesses in contracting. Business ownership is certainly a way to build income and wealth.
Finally, we can steer investors into the new opportunity zones. In 2017, governors helped the U.S. Treasury Department choose nearly 9,000 economically distressed places where people can get a tax break for investing in businesses and properties. There aren’t many investors yet.
It is not necessary to increase racial division or anger to dismantle economic disparity. Since tax systems only empower those who can take advantage of the tax benefits, making benefits more accessible will allow many (not just blacks) to increase their income and wealth.
Attention-seeking Beto said during the same event said, “I can choose to do this as a white man, to involve myself in this conversation. I can just as easily choose to back out of it,” O’Rourke said.
Yes, Mr. O’Rourke please back out of this conversation.
You won’t be missed.