A prime example of this inequality is the aftermath of the housing crisis. While whites were more likely to own homes, they were also more likely to own other assets. For black homeowners, however, houses accounted for a larger portion of their wealth. That means the recession gutted much of the black wealth there was. A report from the ACLU estimates that by 2031, white families’ wealth will be about 31 percent lower because of the recession. Black families will have given up around 40 percent of their wealth.
Taxes can play a role too. According to Dorothy Brown, a professor of tax law at Emory University, some of the credits, deductions, and rules that provide windfalls for families at tax time give white families more of a boost than black or Hispanic ones. “Tax law is a political, a social, and an economic document. So of course there are going to be racial disparities.” Brown says. “To say, ‘the tax law is neutral’ is just nonsense.”
The mortgage interest deduction, for instance, which allows filers to reduce their taxable income, accounted for nearly $70 billion worth of deductions in 2013, and disproportionately helps white households, who make up the bulk of homeowners. And one credit that many assume largely helps minorities—the Earned Income Tax Credit—goes half to white people, Brown says. There are other culprits too, like the way joint returns reward or penalize couples based on earnings. “When blacks marry, they actually have their taxes go up, when whites marry, their taxes go down,” Brown says. Why is this? When couples marry and file a joint return, they can receive either a marriage bonus, which could be as high as 20 percent of their income, or be charged a marriage penalty, which could cost them as much as 12 percent, according to the Tax Foundation. The deciding factor is how close the two individuals’ incomes are: The bigger the gap the bigger the bonus. Brown says that this winds up penalizing black joint filers at a disproportionately high rate, since married black couples are more likely to have similar incomes, while households where one spouse works and the other stays home—the households that receive the biggest bonus—tend to be white. And the same goes for tax-advantaged savings accounts, like pensions and other retirement plans, which Brown says whites are more likely to have access to and to make use of, giving them a huge boost when it comes to building tax-free wealth for later in life.
In Gabler’s piece, for instance, he notes that his financial predicament left him unable to pay for his children’s college education. So he turned to his own parents, who were able to provide the money for elite educations (at the cost of his own inheritance). It’s pretty unlikely than blacks or Hispanics would have access to these financial resources at all, from parents or grandparents. What’s more, windfalls like an inheritance come with tax advantages that a bonus from work or sudden jump in income don’t. It’s not just that white Americans tend to earn more, it’s that they hold more wealth: Less debt, more home equity, more stocks and bonds, more flush retirement accounts. These economic advantages accrue over time and then get passed down to the next generation, who in turn, are able to start their adult lives with a financial cushion, which can help them weather school debt, unemployment, high rental prices, down payments, and emergencies of all varieties, without doing the financially ruinous things that their peers without that backing may have to do. The lucky few who are able to do this, are, by and large, white.