Biden Announces Spending to Reduce Racial Wealth Gap

Biden Announces Spending to Reduce Racial Wealth Gap

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Plus, a make-or-break week for infrastructure talks
Tuesday, June 1, 2021

Biden Announces Plans to Reduce Racial Wealth Gap

On the 100th anniversary of the massacre of Black citizens by a racist mob in Tulsa, Oklahoma, the Biden administration released details on new programs intended to reduce the long-standing racial wealth gap in America.

The White House plan focuses on building wealth for Black families by boosting minority-owned small businesses and expanding access to homeownership. One initiative aims to increase federal contracts with minority-owned small businesses by 50%, which the administration says would translate into an extra $100 billion in revenues for those businesses over five years. A second initiative seeks to reduce racial discrimination in the housing market, with Housing Secretary Marcia Fudge leading a task force examining zoning laws and lending practices.

In addition to the initiatives announced Tuesday, the White House said it will reverse rules made by the Trump administration that weakened protections for minorities provided by the Fair Housing Act.

Targeted spending in infrastructure plan: The White House also highlighted ways that Biden’s infrastructure proposal, the $2.3 trillion American Jobs Plan, would benefit minority racial groups. Administration officials said that a $10 billion community revitalization fund included in the proposal would target historically underserved areas such as Greenwood, the neighborhood in Tulsa destroyed a century ago. The proposal also includes $31 billion for investment in minority-owned businesses, while historically black colleges and universities would share $46 billion in new funding with other schools that serve minority populations.

A long and painful history: In a statement, the White House drew a straight line from the infamous racial violence in Tulsa a century ago to the current low levels of wealth in Black households and communities. “Because disparities in wealth compound like an interest rate, the disinvestment in Black families in Tulsa and across the country throughout our history is still felt sharply today,” the document says. “The median Black American family has thirteen cents for every one dollar in wealth held by White families.”

Still, some Black leaders expressed concerns about the White House plan, and what it leaves out, with the NAACP criticizing the lack of student loan forgiveness. “Student loan debt continues to suppress the economic prosperity of Black Americans across the nation,” NAACP President Derrick Johnson said in a statement. “You cannot begin to address the racial wealth gap without addressing the student loan debt crisis.”

The White House plan is also silent on the issue of reparations, which some Black leaders have advocated.

A Make-or-Break Week for Infrastructure Talks

President Biden set a soft deadline of Memorial Day for infrastructure talks with Republicans to yield significant progress, saying that he was prepared to move ahead without GOP support if necessary. Memorial Day has come and gone, but Biden is keeping the talks going for at least one more week. He will host Sen. Shelley Moore Capito (R-WV), the Republican point person on infrastructure, at the White House Wednesday afternoon for another round of negotiations.

Capito and other Senate Republicans last week issued a $928 billion infrastructure plan, including just $257 billion in new spending, to counter Biden’s revised $1.7 trillion proposal, which is entirely new spending.

Capito told “Fox News Sunday” that she spoke with Biden by phone on Friday and he said, “Let’s get this done.” Capito said she believes that means that the president’s “heart is in it” — but she acknowledged that the two sides still have some fundamental differences.

“We disagree on the definition of infrastructure and we've been working with the president to bring it back to the physical core idea of infrastructure that we’ve worked so well on in the past,” she said, adding that Republicans continue to want to rely on user fees and unused Covid relief funds rather than Biden’s proposed tax hikes to pay for an infrastructure package.

‘Fish or cut bait’:
Transportation Secretary Pete Buttigieg told CNN’s “State of the Union” on Sunday that the White House is “getting pretty close to a fish or cut bait moment” on the bipartisan talks. “This can’t go on in terms of the condition of our infrastructure. Therefore, the negotiations can’t go on forever either,” he said.

Buttigieg said there needs to be a “clear direction” for the infrastructure negotiations by next week, when senators return to the capital.

Sen. Lindsey Graham (R-SC) said Tuesday morning that a bipartisan infrastructure deal is “very possible,” adding “there’s a deal to be had on an infrastructure package around a trillion dollars if [Biden] wants to go down that road.”

White House allies reportedly expect Biden to make a decision on using the process called budget reconciliation, which would allow Democrat to pass a bill without Republican votes, by mid-June if talks stall.

The bottom line:
Time is running out and there are still some differences that may prove too big to bridge. Goldman Sachs economists said Friday that it’s hard to see how a deal comes together. "Although bipartisan discussions on an infrastructure package are continuing, the already low odds of success appear to be dwindling further," economist Alec Phillips said in a note to clients. The Goldman analyst said that Democrats will likely pass one large, combined infrastructure package via reconciliation, with House passage possibly coming in July and Senate approval waiting until September or October.

The final package, Phillips said, will likely scale back Biden’s plans and end up totaling slightly more than $3 trillion, with tax increases offsetting about half that amount.

SALT Deduction Cap Didn’t Led to Exodus From High Tax States: Report

The 2017 Republican tax law’s $10,000 cap on the deductibility of state and local taxes did not lead taxpayers in high-tax states to flee en masse to states without an income tax, such as Florida and Texas, according to a Bloomberg News analysis of IRS data.

Bloomberg’s Jonathan Levin reports that that tax overhaul “had a negligible initial impact on the nation’s domestic migration patterns” and there was no SALT cap bump for Florida, Texas or Washington, which also has no income tax:

“In the first year after the cap was put in place, zero-wage-tax states netted about $1.24 in new earnings from migrants for every $100 already earned there -- slightly less than the net migration rates in the previous three years. Florida, the top destination among zero-tax states, netted $2.65, also a drop from the previous years’ rates. …

“The net migration rate remained negative in high-tax states including New York, New Jersey and California. But as with the states at the opposite end of the tax spectrum, there was no observable shift in trend. In fact, New York’s negative net migration rate got slightly less negative.”

Number of the Day: $3.96 Billion

Media giant ViacomCBS and its corporate predecessors saved roughly $4 billion by using a complex web of corporate tax shelters in Barbados, the Bahamas, Luxembourg, the Netherlands and Britain, according to a report published Tuesday by the Centre for Research on Multinational Corporations, a nonprofit funded in part by the Dutch Ministry of Foreign Affairs.

The New York Times’s Edmund Lee reports: “Much of the $30 billion in non-U.S. royalty revenue brought in by the company’s film and TV franchises, such as ‘SpongeBob,’ ‘Star Trek’ and ‘Mission: Impossible,’ has not been subject to corporate taxes, the study determined.”

The company called that study “deeply flawed and misleading” and said it “demonstrates a fundamental misunderstanding of U.S. tax law,” according to the Times.

Chart of the Day

President Biden has proposed raising the top federal income tax rate to 39.6%, up from the current top rate of 37%. The tax hike would raise $132 billion in revenue over five years, the Treasury Department says, which Biden wants to use to help fund his $1.8 trillion American Families Plan. Here’s a look at how the threshold for the top tax bracket would change via a chart by CNBC.

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