In their article, Professors Goldburn Maynard and David Gamage call for reform of the U.S. tax system, specifically identifying the phenomenon of “wage enslavement” and then arguing that it is a “central injustice of our tax system.” (P. 691.) Professors Maynard and Gamage argue that the problem of wage enslavement should be recognized as central to the pursuit of tax justice and to the “deeply connected” pursuit of racial justice, and they further contend that only by addressing wage enslavement “can we effectively promote a more just future of shared prosperity for all Americans.” (P. 692.)
What is “wage enslavement”? The term, as Professors Maynard and Gamage use it, refers to the means whereby the existing tax system (“‘by heavily taxing wage and salary incomes, and only lightly taxing the returns to owning wealth'”) inhibits historically disadvantaged groups from building wealth or from catching up with historically more privileged groups. Such inhibiting effects then trap many members of historically disadvantaged groups into a cycle of dependence on tax-disfavored wage and salary incomes because of the difficulty they encounter in earning enough wages to cover all living expenses and, further, in starting to build wealth. (Pp. 666-67.) The Professors clarify, “Of course, by calling this phenomenon “wage enslavement,” we do not mean to imply that this is an injustice at anywhere near the level of true, literal slavery.” (P. 667.)1
Before fully addressing wage enslavement, Professors Maynard and Gamage discuss the racial wealth gap in the U.S. as well as how wealth differs from income and why it matters. As it is used in this article, the term “wealth” is defined as “an individual’s economic assets or net worth” and can be measured as an “individual’s assets minus his or her debts.” (P. 668.) “Income,” in contrast, refers to “the flow of dollars over a period of time.” (P. 669.) According to a 2019 Survey of Consumer Finances, the total racial wealth gap is $10.14 trillion—white families have median wealth of $188,200 and mean wealth of $983,400, and black families have median wealth of $24,100 and mean wealth of $142,500. (P. 671.) The income gap is “not as profound as the wealth gap” (P. 672), and the wealth gap has grown over the past three decades (P. 673.)
Professors Maynard and Gamage address certain “supposedly neutral factors that are sometimes offered to explain the size of the racial wealth gap.” (P. 674.) Space constraints preclude a full discussion of those factors, but suffice it to say that the Professors find that those factors (consumption patterns and savings, income, education, asset holdings, the birth lottery, and economic stratification) provide only “partial explanations” for the racial wealth gap. (Pp. 674-79.) Professors Maynard and Gamage contend that, instead, “historical (and some ongoing) discriminatory public policies and governmental practices are a primary cause of the current racial wealth gap.” (P. 674.) Again, space constraints prevent a full discussion of those policies and practices, but the Professors persuasively argue that (1) slavery, Jim Crow, and their legacies (such as the Freemen’s Bureau bills and the Homestead Acts) and (2) discriminatory policies and racial bias in the delivery of aid (including by the Federal Housing Administration and under the G.I. Bill) all played “at least a substantial role in creating and exacerbating the racial wealth gap.” (Pp. 681-84.)
Wage enslavement, as discussed above, is the Professors’ term for the phenomenon under the existing tax system in which wage and salary income is taxed heavily while capital is taxed less heavily, thereby making it difficult for those who are dependent upon wage and salary income (and who have little or no capital) to earn enough to begin saving and building wealth and capital. Professors Maynard and Gamage first address how the tax system favors historically advantaged groups (those with wealth and capital) through the step-up in basis rule at death (here, dear readers, is the trusts and estates angle to this jot). Unfortunately, historically disadvantaged groups (those with little or no wealth or capital) cannot engage in the strategy often called “buy, borrow, and die” (along with its variants), which involves (1) buying assets and holding them as they appreciate in value, (2) borrowing against the appreciated value of the asset (to pay for living expenses or to engage in further investing), and (3) dying with an estate plan that will, among other things, (a) sell assets to pay off prior borrowing and (b) take advantage of the step-up in basis rules. (Pp. 686-87.) Other tax benefits that are disproportionately less available to Black Americans and other members of historically disadvantaged groups include those benefits for owner-occupied housing, employer-provided health insurance plans, and tax-favored retirement savings and retirement plans. (P. 668.)
Professors Maynard and Gamage next discuss how the tax system holds back historically disadvantaged groups. Wage and salary income is taxed more heavily than returns from wealth and capital because, among other things, wages are subject to (1) the income tax, (2) Social Security tax (which, regarding the employer’s portion of the tax, most economists believe employers shift to employees through lower compensation), (3) Medicare tax, and (4) federal and state-level unemployment insurance payroll taxes. (Pp. 689-90.) The Professors point to studies finding that “Black Americans are disproportionately unable to obtain…employer-provided health insurance” and are, therefore, forced to pay for healthcare themselves, further reducing their income and inhibiting wealth creation. (P. 691.) Yet another concern about the tax system is that those more dependent on wage income tend to spend most of their money on goods, and studies have found that “sales taxes are quite regressive and serve to exacerbate racial wealth gaps.” (P. 690.)
Professors Maynard and Gamage conclude that “the United States tax and fiscal systems thus place substantial barriers on earning sufficient wage or salary income to start building wealth.” (P. 691.) These barriers are overcome by “some combination of educational attainment, home ownership, and tax-preferred retirement accounts” as well as by taking advantage of “familial or schooling-based social networks to obtain sufficiently lucrative career opportunities”—but these paths “for escaping wage enslavement are disproportionately much less available for many Black Americans and other members of historically disadvantaged groups,” effectively trapping them in “an ongoing cycle of dependence on tax-disfavored wage and salary income.” (P. 691.)
Professors Maynard and Gamage call for reform of the tax system to eliminate wage enslavement. They acknowledge that the scholarly literature documents numerous ways in which the tax code may serve to disadvantage Black Americans and other members of historically disadvantaged groups. (P. 686.) Their article builds upon prior scholarship by focusing on the phenomenon of wage enslavement and how it (along with the tax system) “obstructs Black Americans and other historically disadvantaged groups from building wealth and economic power and catching up to more advantaged groups.” (P. 686.) The authors raise more questions than they attempt to answer, but they plan to return to those questions, and to evaluate reform options, in future scholarship. (P. 692.) At the same time, they hope to inspire further work by other scholars. (P. 692.) I learned a lot from Professors Maynard and Gamage’s article and was persuaded by their conclusion that the wage-enslavement problem must be addressed in order to promote “a more just future of shared prosperity for all Americans.” (P. 692.)
- Professor Adam Hirsch notes that the term originated as a trope used by Southerners in the 19th century to defend chattel slavery by comparison to the labor system in the North, citing Wilfred Carsel, The Slaveholders’ Indictment of Northern Wage Slavery, 6 J.S. Hist. 504 (1940).
