Council Must Make Changes to Reparations Bill to Better Fulfill Aim of Repairing Past Harms

Chairperson McDuffie and members of the Committee, thank you for the opportunity to submit written testimony. My name is Erica Williams, and I am the executive director at the DC Fiscal Policy Institute (DCFPI). DCFPI is a nonprofit organization that shapes racially-just tax, budget, and policy decisions by centering Black and brown communities in our research and analysis, community partnerships, and advocacy efforts to advance an antiracist, equitable future.

DCFPI applauds Councilmember McDuffie for bringing such important legislation to the Council for consideration. DCFPI wholeheartedly supports key pieces of B25-0152, “The Reparations Foundation Fund and Task Force Establishment Act of 2023,” including the appointment of a Reparations Task Force, collection of data on slaveholding, and creation of a fund to support future plans for reparations in the District. However, we urge Council to make important changes to the bill to better fulfill its aim of repairing the harms of the past:

• First and foremost, the Reparations Foundation Fund (the Fund) should not draw on sales and traffic fine revenue to pay reparations, which disproportionately harms Black residents. DC should tax wealth to support the Fund;
• Council also should refrain from collecting revenue for the Fund until DC adopts a reparations plan, so as not to restrict funding for current needs that support Black residents and communities; and,
• Council should ensure Task Force representation is shaped by Black community leaders and residents. Rather than default to mayoral and DC Council appointees, the Committee could convene a roundtable of Black community leaders from across the District and with heavy representation from Wards 5, 7, and 8 to identify a slate of potential appointees for the Council to approach.

The Case for Reparations and Taxing Wealth in the District of Columbia

The extreme and racialized concentration of wealth in the US and DC has its roots in the stealing of Native American lands and enslavement of African people in order to cement white economic dominance.^[1] That original harm of enslavement was reinforced and exacerbated over centuries through policies, such as Jim Crow segregation, Black codes, racist housing covenants, and tax limits and preferences, among many others, designed to systematically deny Black people and non-Black people of color access to economic opportunity and privilege white wealth.^[2]

In the US and DC, these anti-Black, racist policies and practices were used to suppress the political, economic, and social progress of Black people pre- and post-emancipation and have shaped the outcomes we see today where Black people are more likely to experience poverty, have poorer health, attend lower quality schools, and be shut out of wealth creating opportunities. Slavery and these same policies and practices also helped create the tremendous concentration of wealth among white people, using forced Black labor, commodification of Black bodies, destruction and expropriation of Black property and wealth, and denial of Black political, civil, and human rights, in order to build and maintain white economic dominance.^[3]

The deep harms of our history are far reaching. Wealth offers people choices and opportunity, helps people endure hard times—like a major medical expense or job loss—and can be passed on to future generations. And yet, it remains out of reach for many Black people. Wealth disparities, in contrast, are tied to racial disparities in health, income, and education.^[4] And, a substantial body of research finds that inequality hampers economic growth and mobility (and, conversely, suggests that policies that redistribute resources and lower levels of inequality can strengthen economies and democracies).^[5]

Eliminating the white-Black wealth gap likely cannot happen without repair of the original harm of enslavement. According to one national study, even if Black people had the same opportunities to build wealth as white people from Emancipation to current day, the white-to-Black per capita wealth ratio would still be three-to-one.^[6]  And, because African enslavement and the centuries of racist policies, practices, and violence that followed, have systematically kept Black people from building wealth while allowing white people to amass it, part of the repair of the white-Black wealth gap must be taxing the mass accumulation of wealth by white people to make the redistribution of resources to Black people possible.^[7]

Wealth Disparities in DC

White households in DC have 81 times the wealth of Black households. The most recent data from an Urban Institute report found that median white household wealth was $284,000, compared with $3,500 for Black households, in 2013-2014.^[8]

Moreover, DC has an outsized concentration of extreme wealth relative to its overall population, according to analysis by the Institute on Taxation and Economic Policy (ITEP).^[9] DC makes up 0.2 percent of the country’s population but has 0.5 percent of the nation’s extreme wealth— which is defined as net worth over $30 million. Just 0.4 percent of DC tax units have net worth over $30 million, and these same tax units hold 46 percent (or $183 billion) of all wealth in the District.^[10]

Across the nation, 92 percent of families holding extreme wealth are white, non-Hispanic families.^[11] This is more racially skewed than the distribution of wealth overall, of which 87 percent is held by white families.^[12] And there’s reason to believe that in the District where the racial wealth gap overall is more extreme than nationally that the share of white families with extreme wealth is even closer to 100 percent than nationally.

Recommendations for Improving the Bill

Council Should Fund Reparations by Taxing Wealth, Refrain from Drawing on Sales Tax and Traffic Fines Revenue

Given the ways in which the original harms of African enslavement and the subsequent history of racism that shaped Black and white outcomes and created the Black-white wealth gap, DCFPI strongly recommends that Council generate revenue for the Reparations Foundation Fund through the taxation of wealth, which is held predominantly by white families in the District.

Moreover, using sales and traffic fines to fuel reparations, which have a disproportionate, negative impact on Black residents with low incomes, will undermine the effort to repair past harm. Data show that:

• The bottom 20 percent of non-elderly households spend 6.4 percent of their income on sales taxes, and the second and middle fifths spend 5.4 percent and 4.5 percent, respectively, while the top 20 percent of households spends just 2 percent or less of their income on sales taxes.^[13]
• 75 percent of non-elderly Black households fall among the bottom 60 percent of households by income, compared with 45 percent of white households.^[14]
• And a Washington Post article found that 62 percent of traffic fines issued in the District were in neighborhoods where Black residents make up at least 70 percent of the population, and where the average median household is below $50,000.^[15]

Council should instead tax wealth to fund reparations, and there are many options for doing so:

• DC can tax the highest value properties in DC at higher rates than lower valued properties. For example, a house valued at $750,000 in DC is taxed at the same rate as a home valued at $5 million.
• DC also can tax other assets that allow for extreme accumulation of wealth by increasing the tax rate on capital gains.
• DC can end loopholes in the capital gains tax that allow wealthy investors to pass on stocks, bonds, and other market investments that have increased in value without any payment of tax on the gains accrued while they held those investments. The benefits of this loophole flow almost entirely to the top 1 percent of households.^[16]
• DC could lower the estate tax exemption to raise revenue for reparations. In 2022, DC taxpayer households were exempted from paying any tax on wealth under $4.25 million.^[17]

Council Should Wait to Collect Revenue for Reparations Until Plan is Set

The bill proposes to begin accumulating tax revenue into the Reparations Fund while the Task Force is underway and to continue doing so until September 30, 2028. If at that point the Fund has not been dedicated to support an adopted plan, it will be split the funds between the baby bonds and Small Business Capital Access program. Council should refrain from collecting any existing or new taxes for the purposes of the Fund until the Task Force has set forth a plan and lawmakers adopt that or another plan. Collecting revenue now will restrict funds available for the programs and services that address communities’ needs today. This will be particularly problematic in the District’s current, tight fiscal environment, where many current human needs may go unmet. There is also the risk of the DC Council or mayor tapping the Reparations Foundation Fund for other purposes while it goes undedicated. The recent case of the mayor sweeping baby bonds program funds in her budget proposal is a cautionary example.

Furthermore, dedicating general operating dollars to predetermined uses, should the Task Force not devise a politically feasible plan, removes from Council and the public the opportunity to decide how those funds should be spent. Waiting will also allow the Council to come up with a revenue stream that is right-sized to the Task Force plan. As it is, the bill’s proposed dedicated funding would likely be a drop in the bucket relative to what would be needed to fund reparations. A more prudent route would be to wait until the Task Force has set out its recommendations, determine the cost of those plans, and devise a revenue stream that matches the level of funding needed and timeline.

Council Should Ensure Black Communities Most Harmed by Historic Racism Shape Task Force Members

Council should ensure Task Force representation is shaped by Black leaders and residents whose communities have been most harmed by the legacy of anti-Black racism. Rather than default to the standard process of mayoral and Council appointees, the Committee should engage with Black community in DC on developing a list of candidates for the Task Force.

This could happen in a couple of ways. One option might be for the Committee on Business and Economic Development to convene a roundtable of Black community leaders from across the District, and with heavy representation from Wards 5, 7, and 8, to identify a slate of potential appointees that the Committee of the Whole could then consider and vote on. DC Council could still offer guidance for the kinds of expertise needed on the Task Force, as laid out in the bill, and also allow for community members to identify additional types of expertise.

Another option might be to hold the roundtable of Black leaders and community members to develop the criteria and candidate list and then allow the Chairman of the Council to select from that list the nine members for the Task Force. This is similar to the approach to establish the Early Childhood Educator Equitable Compensation Task Force.^[18]

Other potential considerations for the Task Force:

• Allow for more members of the Task Force. With a such a new topic of exploration for the District, more input is better than less.
• Ensure paid staffing of the Task Force, potentially someone embedded in the Council Budget Office and assigned to the Task Force.
• Leave open the possibility for extending the work of the Task Force. One year may not be enough time to build the database, explore the options for repair of anti-Black racist harms, and land on proposals for the Council and mayor’s consideration.

It is critical that this undertaking of a reparations task force, which will help push the District to think about repair with unprecedented depth and rigor, not be held back by traditional processes. We can and should pursue a process that allows Black leaders and residents to shape its membership and work.