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Solution for Failed Black Owned Small Businesses

Josephine Sek

English 10803

Dr. Stacey Said

November 2, 2021

Introduction

Why is it that the world acts oblivious to constructs we create? Race plays an

unconscious role in countless political, economical, and social aspects. Despite its commonality,

people choose to blindfold themselves to the racial inequity in the United States every single day.

It is events such as the Covid-19 pandemic that reiterate question about the equality and unity of

the nation. During the pandemic there were numerous sources raising awareness to the issue of

failing small businesses, however, conversation about how this affected minority groups—

specifically Black Americans—was never addressed. Support by the government was swiftly

offered once severity of the issue was communicated, and various forms of financial support

were provided, yet many loans were inapplicable to black business owners. The lack of prior

experience to major company growth is also a variable deserving of greater attention, with

analysis towards this issue. To solve the problem of lasting covid-19 effects on black business

owners, the government of the United States should alter individual income tax because it will

increase an economical “middle” class, create opportunity for financially struggling individuals,

and instil economic equality within the United States.

Increased tax background information

The American tax system is supposed to ensure that citizens pay their fair share of taxes,

yet this is not the case. The top one percent of Americans attribute to about 40 percent of federal

tax. Initial analysis of this number would demonstrate that the top one percent are at a

disadvantage, however, what is failed to consider in this scenario is income and not just general

wealth. In retrospect, the taxed amount accumulates to approximately 1 to 3 percent of their total

income. Statistics show that 25 of the richest people in the United States have a “true tax” of

almost nothing (ProPublica, 2021). Numbers like these show us that although the standard

amount is drastically more, than that of a middle class citizen, the rate/percentage of which is

taken from the total income poses the issue of economic inequity. The top 1% of the richest

individuals are composed of white people. The lack of racial diversity visible is a clear indicator

that there are blockages in the business world that prevent a minority race from prospering. The

higher rate of black owned business failure demonstrates specifically what hardships are faced in

troubling circumstances, like the Covid-19 pandemic. The higher percentage of lower class black

Americans exhibits the negative effects of the tax system on majority minority groups in the

United States.

Chart of the true tax rate of billionaires (ProPublica, 2021).

Body

Proposed Solution

Incorporation of this solution will take initiative from the government, specifically

current president Joe Biden. The president of the United States is already in action when it comes

to increased tax rates. Analysis done by the Tax Foundation shows that Biden will raise the top

corporate tax rate to 26.5 percent (Tax Foundation, 2021, para. 3). Biden’s tax plan has pledges

to not raise tax on anyone earning less than $400, 000, which ultimately reflects how this will

impact the top percent of U.S citizens.This Nation wide tax increase is looking to be put in place

as soon as possible, however, is being met with contrasting argument due to the surge of

Covid-19 delta variants, hurricanes, wildfires, and U.S retrieval for Afghanistan. Considering

that black Americans make up majority of the lower class in the United States, black small

business owners will be presented with the opportunity to grow their companies and rebuild what

was lost during the pandemic. As taxes are lowered on the financially struggling individuals,

economic equality and a fair playing field will be conferred.

Justification for the Solution

An Increase in the Middle Class

One reason why increased tax on the rich would be beneficial is how it would increase a

middle class in the United States. A widely discussed issue is the shrinking of this group, and the

drastic wage gap between the poor and the rich. Poverty has increased by 6 million since the

beginning of the pandemic, with numbers showing its greatest impact on Black Americans

(DeParle Jason 2021, para. 2). With Joe Biden’s new plans to increase tax rates on the rich, the

wealthier individuals in the United States will have to contribute a greater amount to federal tax.

The poor, which includes a large population of black people, will be taxed a smaller rate

allowing them to use income towards other means (such as businesses restoration). A lowered tax

rate for those individuals with small businesses would be highly beneficial, considering how

previously tax rates remained the same despite a much lower income. A general benefit for small

businesses would ultimately provide benefits for black business owners and help rebuild

finances.

Creates Opportunity for Financially Struggling Individuals

Another reason increasing taxes on the rich is considered a solution to this problem is

because it creates opportunity for the financially struggling individuals. One prominent

difference between the finances of black and white Americans, is that many white Americans

have “old money”. The system in the United States has always been more advantageous towards

white people and therefore this population has accumulated a greater wealth. On the contrary,

black Americans have garnered “new money”, but tend to have the responsibility of taking care

of their families, whereas, white Americans gain their initial funding from this source. Jennifer

Cloke, a women of African descent, and mother of two children stated, “My parents never payed

for anything, and now I rather send them money. They just never had the money, but I am

grateful I can now help them through the opportunities that were available to me”. (Jennifer

Cloke, 2021). By increasing tax on the wealthier individuals of the United States, those with a

lower income gain opportunity to prosper and instil missing equity in the nation. Those

individuals looking to gain “new money”, lack the support from family members and other

financial sources, relating to how black owned small businesses had nothing to fall back on.

Therefore, black owned small businesses have the opportunity to excel and surpass the

challenges placed on them due to race if a tax law like this was to be put into action.

Instils Economic Equality in America

A third reason the raise of tax on the rich is beneficial is because it would instil economic

equality in America. Since the beginning of America’s independence, Black Americans have

been placed at a disadvantage, specifically when it comes to taxes. One thing statistics have

shown is that white Americans have and continue to pass down assets, whereas black Americans

tend to climb. Since the 1930s, the supreme court had ruled to lower taxes for those who were

married, justifying this with the idea that married individuals have a shared income. However,

what was failed to consider is marriage is much less common in Black Americans. A gap of 17

percent is present, showing that 88 percent of white people get married, and only 71 percent of

black people (Ben Steverman, 2021, para. 7). There are also drastic differences when it comes to

education, debt, and residence. Although there are various factors to consider, none are taken into

consideration by the government when determining tax rate. Statistics about tax payment are

never grouped by race, but maybe they should be. The government says it “does not see color”,

and that is exactly the problem. With the past the United States holds, mistakes and issues cannot

be erased, and instead should be outspoken. By increasing taxes, a predominantly white

population would receive fair taxes, which would promote a new sense of equality in a nation

that is missing it. The failed businesses affected by the pandemic would begin to have higher

rates of success, considering their “opponents” would be fairly taxed. Black business owners

would have a window of time where they could use money originally going towards taxes, on

building (or in some cases rebuilding) their company.

Limitations

Hurt on the Economy

One main limitation to this proposed solution is the hurt it would have on the economy.

Although equality would be instilled between Americans, larger businesses would be heavily

impacted. Bigger companies would be hit majorly by the tax change, just after already

experiencing fluctuation during the pandemic. “It would make investment and hiring plans less

viable” (Erica York, 2020, para. 4). This would ultimately result in less competition between

companies and an increased investment rate in the United States. Workers who are employed for

these companies will also face burden (which also includes black Americans), representing a

back fire to president Biden’s increased taxation plan. The motivation for business success will

also drop considering the decreased tax on businesses with a lower income. The resulting effect

of this has left politicians controversially expressing limits of Joe Biden’s plan to increase taxes.

Predictions made about the presented plan gage on wether or not it will actually improve the

economy.

Senate Votes

When this proposed solution is analyzed, there truly is not many limitations. President

Joe Biden has the power to increase taxes if he pleases to do so. However, the President is not the

only individual who has ability for decision making in the United States. In order for a new tax

law to be put in place, such as the one Joe Biden is trying to implement, a majority vote must be

present in the house of senate between both parties. At the moment how much taxes will be

increased is not determined because there is a 50/50 vote. Therefore, the only limitation stoping

the initiation of a new tax law is government regulations and policies. Many politicians are

wealthy business men, so despite their interest in changing taxation laws in the United States,

self awareness is also present during voting.

Conclusion

To conclude, in order to solve problems related to the lasting effects of Covid-19 on small

black owned businesses taxes should be increased to reverse the loss of the middle class, create

opportunity for financially struggling individuals, and instil a sense of economic equality in the

United States. By integrating this solution black Americans would be reimbursed for the

systemic disadvantages that has been engraved in the United States since the beginning of the

country’s independence. With the pandemic’s lasting effects, it is uncertain when a new tax law

will be passed. Until then new solutions need to be brought to light, and attention to problems

need to be addressed because the how’s can only be determined by the why’s.

References

CBS Interactive. (n.d.). Richest 25 Americans have a "true tax rate" of almost nothing: Report.

CBS News. https://www.cbsnews.com/news/income-tax-wealthy-bezos-buffett/.

Deparle, J. (2020, October 15). 8 million have slipped into poverty since May as federal aid has

dried up. The New York Times. https://www.nytimes.com/2020/10/15/us/politics/federal-

aid-poverty-levels.html.

Erica York, opinion contributor. (2020, October 26). Raising taxes will hurt the economy.

TheHill. https://thehill.com/opinion/ nance/522787-raising-taxes-will-hurt-the-

economy?rl=1.

Jesse Eisinger, J. E. (n.d.). The secret IRS les: Trove of never-before-seen records reveal how

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O'Dowd, P. (2021, May 17). 'the whiteness of wealth' probes why Black Americans pay higher

taxes. 'The Whiteness Of Wealth' Probes Why Black Americans Pay Higher Taxes | Here

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Pramuk, J. (2021, September 13). House Democrats propose new tax hikes to pay for their $3.5

trillion bill: Here are the details. CNBC. https://www.cnbc.com/2021/09/13/house-

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Steverman, B. (n.d.). A Tax Code Optimized for White Wealth Leaves Black Americans Behind.

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