Mass Incarceration

How to pay for reparations in California? ‘Swollen’ wealth could replace ‘stolen’ wealth through taxes

The panel accountable for the nation’s first state-level exploration of reparations for Black Individuals mentioned an necessary query this weekend: How will the state pay for reparations?

The California reparations job drive listened to testimony from consultants who recommended attainable sources for compensation, after previous meetings had touched on the potential for hundreds of thousands in monetary reparations for specific harms. The consultants’ solutions included taxing the wealthy, akin to by way of a state property tax or a “mansion tax;” incentivizing the rich to assist fund reparations by offering tax breaks, akin to how charitable giving minimizes one’s tax burden; or serving to all taxpayers with below-median wealth via a tax credit score, which might in flip assist Black households.

Recommendations from the skilled testimony, given on the job drive’s assembly at San Diego State College on Friday, might be included into the physique’s closing suggestions to the state legislature, that are due this summer time.

“That is extremely insightful and provocative,” stated Lisa Holder, a job drive member. “It provides us tons to consider.”

The consultants’ solutions about attainable sources of funding had been based mostly on their testimony that present U.S. tax legal guidelines favor the rich — who’re most certainly to be white.

“Our tax legal guidelines as written have a disparate affect,” stated Dorothy Brown, a tax professor at Georgetown Legislation and creator of the e-book, “The Whiteness of Wealth: How the Tax System Impoverishes Black Individuals and How We Can Repair It.” She stated “Black persons are more likely to pay greater taxes” as a result of they’re much less more likely to acquire entry to the identical tax breaks as their white friends.

Key Phrases: California reparations push needs to be a ‘game-changer,’ author of bill says

Brown stated what can be perfect is a reparations tax credit score designed to compensate Black taxpayers, however she thinks it might face authorized challenges. So she stated the subsequent neatest thing can be “a wealth tax credit score relevant to all taxpayers in households with beneath median wealth.”

“Given the racial wealth disparity, this may lead to a disproportionate proportion of Black households receiving the credit score,” she testified

A pair of property planners who testified launched the thought of taxing “swollen” wealth to switch “stolen” wealth, and confirmed that the racial wealth hole widened after 1981 — when the biggest tax cut in American history was enacted. They cited Federal Reserve figures from 2019 that confirmed the common white family had $812,000 extra wealth than the common Black family.

One among their solutions for sources of cash for reparations is a state property tax. (Underneath federal regulation, the lifetime estate-tax exemption is $12.9 million for individuals this 12 months.) Their different solutions embody: a mansion tax, a graduated-property tax — which they acknowledged will not be possible in California as a result of Proposition 13 taxes properties based mostly on their worth once they had been offered — or perhaps a tax on the fledgling “metaverse.”

Additionally: California reparations push could give Black residents hundreds of thousands of dollars — here’s what they say they would do with it

Sarah Moore Johnson, founding associate at Washington, D.C.-based Birchstone Moore, is without doubt one of the property planners who testified. She proposed a state-sponsored reparations tax fund that might obtain charitable contributions.

“Charitable contributions are at present permitted to the state or federal authorities, however just for public functions,” she stated. “If racial restore is acknowledged as a public function,” it might be tax-deductible in the identical method as charitable contributions, she stated.

Acknowledging that the thought of reparations continues to be controversial, job drive member State Sen. Steven Bradford requested the consultants whether or not they assume rich individuals, like their purchasers, can be against such concepts.

“What I hear from my purchasers is a degree of guilt about having the ability to give this a lot cash to their heirs,” Moore Johnson stated. “From the place I sit and what I see, I see some assist.”

Raymond Odom, an property tax lawyer and director of Wealth Switch Companies at Northern Belief in Chicago who co-presented with Moore Johnson, echoed that sentiment.

Odom stated he has helped “wealth get concentrated” for many years, and the way that occurs is thru very rich individuals establishing foundations and charities that permit them to keep away from taxes. “It’s a pleasure having the ability to speak to individuals who might change that,” he stated, including that he has “talked to rich white people who’re behind this.”

“I can inform you unequivocally: Very rich individuals have a lot of hassle determining what to do with their wealth,” Odom informed the duty drive.

The Worth Hole: Reparations are a ‘human rights issue’ that will boost the economy, says California task-force chair

Addressing the potential for counting on charitable sources, job drive member Don Tamaki stated, “I can’t argue with the truth that charity is just not reparations. However in my humble opinion, we have to discover each avenue of funding.”

Wherever any attainable compensation comes from, Brown, the tax professor and creator, had two key solutions for the duty drive. First, she stated reparations shouldn’t be handled as taxable earnings, citing precedent akin to tax-free therapy of Holocaust funds, and Japanese-Individuals who acquired compensation due to their mass incarceration throughout World Warfare II. And her second suggestion was that African-Individuals shouldn’t need to pay for their very own reparations, which she stated “can be totally inconsistent with the intent and spirit of the duty drive’s objectives.”

See: Historic report lays out case to compensate descendants of slaves in California

The nine-member job drive, established by a 2020 regulation and accountable for learning and creating reparations for African-Individuals due to slavery, launched a preliminary report final 12 months. It’s set to disband when it submits its closing report and proposals to the state legislature by its July 1 deadline. However on Saturday, the duty drive voted to stay intact for one more 12 months — till July 1, 2024 — to assist with the implementation of its proposals, regardless of questions from a few of its members about whether or not it had the authority to determine to take action.

The duty drive additionally voted to vary the dates of its subsequent assembly, which was beforehand scheduled for the tip of February. In what might be the ultimate in-person assembly earlier than the report is due will likely be held March 3 and 4 in Sacramento.

Associated: Reparations task force also wants to change California policies

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