This is the most recent Intersectional Money feature.
When I first heard of and read articles that referenced the Black tax, it was often described in the context of Black Americans and immigrants who are having to deal with the financial and emotional pressure of supporting family members. As someone who is a twice immigrant, of mixed race and identifies as a Black woman, I connected with that assumption and for a time explained it as such when asked about the Black tax.
I learned that I was wrong.
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What is the Black tax, really?
In the fall of 2019, I began to learn more about what the Black tax truly is. I realized that many were talking about its emotional impact, but few correlated the historical context and quantified the economic ramifications of how Black Americans are systemically treated. Only after reading The Black Tax: The Cost of Being Black in America by author Shawn D. Rochester did it become clear to me how pervasive this tax is because it affects every aspect of our lives.
What is the Black tax? It is the financial cost of multi-generational economic disparity and discrimination against Black Americans due to explicit and implicit anti-Black bias.
This prejudicial tax is found in virtually every sector of our economic landscape including:
- Real estate.
- Auto lending.
- Business financing.
- Government policies.
To understand how the Black tax impacts nearly 50 million Black Americans today and the fact that they own only 2% of the wealth in the U.S. after four centuries, we must look in the rear-view mirror of history.
Note: The author of The Black Tax, Shawn D. Rochester, will be speaking at the first day of the Elevate conference. Grab your free ticket here!
History of the Black Tax
The Emancipation Proclamation issued on January 1, 1863 by Abraham Lincoln said that all slaves in the South should be set free. The reality is that it took several years for all Black slaves in the U.S. to be liberated. White landowners had no intention of giving up their primary source of labour — i.e. black slaves — that easily.
Former slave owners, along with elected officials, devised new ways to continue slavery by another name. Black codes, vagrancy laws, convict leasing, and sharecropping contracts, served as a legal means to continue to discriminate against Black Americans and ensure that former Black slaves would end up working their lands for little to no pay or be forced into debt servitude.
The Homestead Act
The wealth gap for Black Americans was exacerbated through measures such as The Homestead Act of 1862 which gave a combined 270 million acres to 1.6 million families until the legislation was repealed in 1976.
Former slaves were also eligible to submit a claim. However, the filing cost of $18 plus $6 to receive an official land patent, paying $1.25/acre, and requirements that included building a home and farming the land was unaffordable for the vast majority.
Over 99% of the 1.6 million who benefited were White families. It is estimated that up to 93 million Americans today are beneficiaries of this land allocation.
40 Acres and a Mule
Special Field Order N15 issued by General Sherman in 1865, commonly referred to as the original reparations for slavery act which promised “40 acres and a mule” to former Black slaves, was essentially nullified when President Andrew Johnson issued a proclamation to return the 400,000 acres of confiscated land back to White southern owners.
Jim Crow Laws
Jim Crow laws, enacted in the late 19th through early 20th century, entrenched racial segregation in every aspect of public life: Education, transportation, facilities, and workplaces. The laws also contributed to the financial inequality suffered by Black Americans and lack of access to land and/or capital prevented the creation of wealth building opportunities.
Black citizens who were able to build a community that flourished, such as Black Wall Street in Tulsa, OK, and in Rosewood, FL, among others, were perceived as a threat to the White establishment. Their towns were literally burned to the ground and many Black residents were beaten and/or murdered.
The practice of redlining was formalized in the National Housing Act of 1934 — an act which also established the Federal Housing Administration (FHA). Residential maps were created for cities across the U.S. and housing zones from the newest to the declining areas were outlined. The older areas tended to be where many Black neighborhoods were situated.
These maps were used by government and private mortgage lending entities to facilitate racial segregation through the denial of loans to Black applicants who wanted to purchase property in new White suburban communities and refusing to insure mortgages in predominately Black communities. Redlining and the use of blacklists directly contributed to Black neighborhoods not being able to attract and keep families, and spurred a decrease in their property values.
The Wagner Act
In 1935, Congress passed The Wagner Act, legalizing labour unions. But it made certain to allow unions to exclude non-Whites until the late 1970s. As a result, many Black Americans did not have access to higher paying jobs with benefits and healthcare.
Discrimination Continues into the 21st Century
Lest we think that policies such as redlining and other discriminatory practices against Black Americans have ceased, we only need to look at recent settlements.
Big Banks Facing Consequences for Racial Discrimination
In 2015, the U.S. Dept. of Housing and Urban Development (HUD) substantiated complaints that Associated Bank intently rejected mortgage applications from Black and Latino applicants. Another investigation by the U.S. Department of Justice (DOJ) proved that Hudson City Savings Bank also denied fair access to mortgages for Black Americans and Latinos. In both instances, in addition to a sizable monetary penalty, the settlements required the respective banks to open branches in non-White communities.
Just last year, in 2019, Wells Fargo paid $10 million in a settlement stemming from a lawsuit that alleged that they engaged in discriminatory lending practices which caused high foreclosure rates in Black and minority neighborhoods. In 2012, the same bank agreed to pay $184.3 million for allegations that it charged higher mortgage interest rates and fees along with issuing subprime loans to Black Americans and Latinos despite them having favourable credit scores.
Racial bias against Black Americans persists to this day in corporate America. In the most recent bias allegation against Bank of America, the latter paid $4.2 million in 2019 to settle government claims that the bank discriminated against Black, Latino, and female applicants in their hiring practices.
The Black Tax, Business and Career
Black men and women continue to lag financially and professionally compared to their White counterparts in the workplace due to factors such as:
- The pay equity gap.
- Lack of salary transparency.
- Biased hiring and management practices.
- Poorly implemented diversity, equity and inclusion programs that do not address issues that are specific to Black employees
- Lack of career growth and advancement opportunities to senior management and C-suite roles.
Access to business capital and financing continues to be a hurdle for Black Americans. If they do manage to obtain credit it will likely cost them more, however the typical result is that they are denied access. Since the net worth of Black American families only accounts for one tenth of that of Whites, Black business owners are forced to use personal credit or borrow from family and friends to fund a start-up. The disparity of business financing results in Black businesses not being able to scale or employ others to further benefit their communities.
Online survey results reported by TIME magazine regarding the 2020 U.S. Small Business Administration (SBA) EIDL and PPP loans issued in response to the economic impact of COVID-19 further underscores the financial challenges that Black business owners experience.
The Black Tax Exists Today
It is estimated that Black Americans have been deprived of upwards of trillions in today’s dollars due to anti-Black discriminatory laws and practices that instead benefitted the economic trajectory of White Americans. The latter are significantly more likely to receive inheritances and a larger amount of it than Black Americans.
The Black population continues to pay the price for being Black in America and the cumulative effects from slavery to this day have led to a collective emotional and financial trauma that seems nearly impossible to overcome. Yet the words of the poem written by the late Maya Angelou, “Still, I Rise”, rings ever true.
Black Americans are committing themselves in greater numbers than ever before to economic development and giving of their talents, time, and resources to their community. They have realized that higher education is not the only “pathway to success”– especially as there are serious racial inequities and financial obstacles regarding access to quality education. It will take a concerted and consistent effort on all fronts to make the necessary inroads for Black people to create intergenerational wealth.
Reducing the Impact of the Black Tax
The collective purchasing power of Black Americans is reported to exceed 1.2 trillion annual US dollars. There is a growing consensus of the need to direct more of that purchasing power towards supporting Black businesses. Some of the key ways to reduce the impact of the Black tax include:
- Purchasing products and services from Black establishments.
- Hiring Black Americans for well-paying roles.
- Banking Black.
- Requiring that governments and corporations devote a larger percentage of their annual spend to Black companies.
In closing, consider this article as a brief introduction to the Black tax. My hope is that readers of all races will further educate themselves on the topic. Also, that readers will be motivated to act upon what they can do to counter anti-Black bias, both at a personal and systemic level.
Kassandra Dasent is a financial wellness engineer and speaker. Focusing on how emotional awareness can have a direct and lasting impact on one’s relationship with money, Kassandra provides her audiences with practical solutions to help them achieve holistic wealth. Kassandra is also a certified project manager (PMP/CSM) and Founder of BridgeTech Enterprises. She has been featured in numerous media outlets including Forbes, US News & World Report, Business Insider, Fast Company, Travel Noire, Thrive Global, Yahoo! Finance and News, and Glamour.
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When I first heard of the Black tax, it was often described in the context of Black Americans and immigrants who are having to deal with the financial and emotional pressure of supporting family members. I connected with that assumption, but learned that I was wrong.