No one enjoys preparing, let alone paying, our taxes. But this time of year offers us an opportunity not only to complain about taxes but to think about why we pay them and for what. Paying taxes today certainly funds the budget for next year, but our progressive tax structure implements a fundamental value in American society: It redistributes wealth from the most fortunate to those who are least well off.
Warren Buffet recently testified before Congress that the heirs of the wealthy should be taxed, and taxed quite heavily, on their inheritance. Mr. Buffett, ranked No. 2 in Fortune Magazine’s list of the wealthiest Americans, has unique moral authority to argue against the consolidation of wealth in a United States aristocracy. But the richest men and women on the Fortune 400 list shouldn’t be the only ones speaking out. My peers, white middle and upper-class baby boomers who stand to inherit nicely from our parents, also ought to weigh in on this debate.
In the next 20 years we, the baby boomers, are poised to inherit sums ranging from nice nest eggs to veritable fortunes from our parents. We stand on the verge of the largest intergenerational transfer of wealth this country has ever seen. The gross amount of this wealth transfer lies somewhere between 40 and hundreds of billions of dollars. While anti-aristocratic impulses may motivate some to renounce their inherited fortunes, any entitlement to such a lottery-like windfall must be understood in the historical context of race discrimination in the U.S. and contemporary notions of racial justice.
Real estate investment has been the great wealth-generating machine of my parents’ generation, yet African-Americans have been systematically locked out of this unique opportunity to buy in, sit tight and get rich. The GI Bill underwrote segregated housing through discriminatory lending policies. For decades real estate agents steered black buyers to black neighborhoods and white buyers to white neighborhoods, and local and federal governments invested in the infrastructure in white neighborhoods but not in those dominated by black people. Even today, we see the burden of the mortgage lending crisis falling disproportionately higher on black homeowners. As a result, white people have been given opportunities to profit from the booming real estate market over the last 60 years in which African-Americans had no part. But the racially unequal investment market started well before the end of World War II. Slavery was abolished in 1865 without making good on the many promises made to the freed slaves that they would receive land – both as reparation for enslavement and as the leg up they needed to start their lives anew. Instead, emancipation amounted to a set of legal rights without the resources necessary to exercise them. The failure to see land rights as a key component of what the ex-slaves were owed meant that the former slaves – and their descendants – were unable to get in on the land boom of the 20th century. This goes a long way toward explaining why today the median net worth of African American households is only eight percent of that of white households.
Against this historical reality, I have to ask: Do I have a greater moral claim to inherit the wealth of my parents’ generation than do the great-great-grandchildren of slaves? Should we understand the real estate profits of the 20th century as a form of unjust enrichment? The way wealth has accumulated in this country along racial lines leads me to think that the color of one’s skin determined whether you had the bootstraps you needed to pull yourself up. I can’t help but see the wealth of my parents’ generation as the residue of the unfinished business of the abolition of slavery. What if we understood the causes of the racial disparities in wealth accumulation in this country as vesting an ongoing right to some of the real estate profits of the last century? As I see it, my parents and their peers are de facto trustees of an I.O.U. (or better yet, we owe you) long owed to the decedents of slaves. Ironically, racially discriminatory policies ended up making these investments all the more profitable, but it’s time that the beneficiaries in whose interest this constructive trust was created be recognized.
For these reasons, I have come to the view that my contemporaries and I who, by law, stand to inherit significant sums from our parents should acknowledge that we are not morally entitled to do so. Rather than contributing to and benefiting from the even greater concentration of wealth in white hands, we ought renounce some or all of this racially tainted legacy and redirect this bounty to the cause of racial justice in our communities. I’ve chosen to have my inheritance redirected to a fund I’ve set up with the New York Community Trust. That way, the money will never touch my hands, and, in effect, it will never feel like or be mine to spend.
Katherine Franke is a professor of law at Columbia University. She can be reached at kfranke@law.columbia.edu.
