States Should Adopt Policies to Help Dismantle Racial Barriers to Broader Prosperity

The benefits from the nation’s continuing economic recovery haven’t been shared equally across racial and ethnic groups, and even the gains that we’ve seen are slowing, new Census Bureau data show. That heightens the need for states to advance policies that can tear down racial and ethnic barriers to economic opportunity.

Building strong, thriving state economies and communities requires creating conditions under which every individual can realize his or her full potential, no matter their race or ethnicity or where they live. But new state data from the American Community Survey show that:

• Fewer states are seeing incomes rise, likely due in part to a slowdown in employment gains, as we predicted last week. While 46 states and Puerto Rico experienced median household income growth from 2014 to 2016, just 36 states plus the District of Columbia did so from 2015 to 2017.
• Income gains were not shared equally across racial and ethnic groups. While 36 states saw overall household incomes rise from 2015 to 2017, just 13 of the 38 the states with reliable data saw incomes rise for black households. That was fewer states than from 2014 to 2016, when out of the 40 states with reliable data, 22 saw black household incomes rise.
• Latino households in many states have also missed out on the benefits of a growing economy over the last few years. Of the 45 states with reliable data, just 21 saw improvements in household incomes from 2015 to 2017.

Many barriers perpetuate inequality and keep communities of color from sharing more fully in the nation’s prosperity. They include discrimination in hiring and promotions, overrepresentation in low-wage work, and the greater likelihood that people of color are segregated in neighborhoods that lack quality schools, jobs, or transportation. Black and Latino households also are overrepresented at the bottom of the income scale, and thus also are likelier to pay a greater share of their income in state and local taxes, which tend to fall hardest on those with low incomes.

State policymakers can help dismantle these barriers by, for example:

• Ensuring that the highest-income households and profitable corporations (whose shareholders are overwhelmingly wealthy and white) pay their fair share and shift the distribution of who pays the most in state and local taxes as a share of their income. States can, for instance, strengthen their income taxes, better tax wealth, and close corporate loopholes.
• Using dollars raised through high-income and wealth taxes to make the critical public investments that address inequities. For example, states can ensure that every child gets a quality education by raising teacher pay; upgrading school buildings in poor condition, which are disproportionately found in economically struggling neighborhoods; reducing class sizes; and providing more early education.
• Adopting or expanding a state Earned Income Tax Credit to reduce state and local taxes for struggling families while helping them pay for child care, transportation, and other things that make work possible. These credits improve racial and gender equity because they go to workers with low wages, a category in which not just people of color but also women are overrepresented, and research suggests that the credit may help children of color in particular do better and go further in school.