As an entrepreneur, I know first-hand the challenges minority entrepreneurs face. I also know the talent, dedication, determination and vision that minority entrepreneurs possess in their desire to become a part of and a contributor to the American Dream. For many years, I have been vocal about the state of Black wealth and the daunting challenges minority business owners and entrepreneurs face. Without question, lack of access to capital and capital formation are the principal factors holding back opportunities for minority businesses and as a consequence wealth creation within the Black community. — Robert L. Johnson, Forum on Economic Empowerment in the Black Community

While addressing the Conservative Black Forum hosted by Congressman Allen West (R-FL-22) that focused on the economic empowerment in the African American community, Robert L. Johnson, founder and chairman of The RLJ Companies, called for a renewed national discussion on the growing wealth gap which he referred to as a “wealth gap Tsunami threatening African Americans.”

Johnson cited a recent study conducted by the Pew Research Center, which concluded “The wealth gap between white and African American families has more than quadrupled over the course of a generation; the racial wealth gap increased by $75,000, from $20,000 to $95,000; the median wealth of white households is 20 times that of black households; and at least 35% of African Americans have no assets.”

In response to this compelling national crisis, Johnson stated that, “We must admit the harsh reality of a history of institutionalized racism and economic discrimination against African Americans is the primary cause of wealth disparity between Black and white Americans” and “we must be willing to talk about race recognition remedies at the highest levels of government as well as between Black and white Americans.”

In his remarks to the Forum, Johnson listed several race recognition policy initiatives that could be discussed. For example, encourage majority-owned businesses to invest in black-owned companies by deferring the taxes on the economic gain similar to the FCC “tax certificate program” which motivated major media companies to sell to minorities and create a Treasury-backed fund to securitize short-term borrowing or emergency loans made by minority banks or other lending institutions to Black families provided these loans are marketed and made in a regulated and transparent manner. The securitized loans would encourage banks and lenders to make short-term or emergency borrowing available at reasonable rates and end “payday” lending as we know it today and break the cycle of borrowing at outrageous interest rates.

“Something has to be done to recalibrate our economic system to address these problems. We need the political courage to propose race-based remedies based on the disparity caused by past and present race discrimination. In the next 25 to 30 years, the majority of Americans will be black and Hispanic. There is a compelling national interest in addressing racial disparity and if we are to be a successful nation and compete globally, we must ensure that all Americans are given an opportunity to fully participate in the U.S. economic system,” he concluded.

Johnson’s Ideas To Create More Black Businesses and Increase Black Wealth:
  1. Allow black businesses to be eligible for government set aside contracts if they own 10 percent of a business rather than the existing 51 percent rule due to the 10-to-1 wealth gap; and significantly increase the dollar volume of set aside contracts for Black businesses across all government agencies.
  2. Encourage majority-owned businesses to invest in black-owned companies by deferring the taxes on the economic gain similar to the FCC “tax certificate program” which motivated major media companies to sell to minorities.
  3. Allow African American families earning less than $250,000 annually to defer federal income taxes, without interest, provided tax deferrals are placed into a 401(k) type savings account which can only be drawn out at retirement or upon death at which time the government would be reimbursed for the deferred taxes. The gain on the 401(k) investment would be available to the families at retirement or passed on to future generations.
  4. Create a Treasury-backed fund to securitize short-term borrowing or emergency loans made by minority banks or other lending institutions to Black families provided these loans are marketed and made in a regulated and transparent manner. The securitized loans would encourage banks and lenders to make short-term or emergency borrowing available at reasonable rates and end “payday” lending as we know it today.
  5. Require large banks under the Community Reinvestment Act to fund a nationwide marketing campaign targeted to the Black community with a focus on financial literacy and savings.

 

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