Maryland is not immune from the persistent racial wealth gap that exists in this country and holds back our communities from being as prosperous and thriving as they could be. This racial gap has a persistent negative effect not just on some communities, but on our economy as a whole – and we must confront it head-on. The effects on households are staggering. Median household wealth for Black, Latino, and white households is around $25,000, $36,000, and $188,000, respectively. Nationally, it is estimated that the racial wealth gap and its dampening effects on consumption and investment will cost the US economy between $1 trillion and $1.5 trillion over the next decade. As Comptroller, Brooke will use her seat to convene stakeholders, thought partners, and government officials to implement strategies that challenge the gap and begin to undo decades of systemic racism in our housing and business sectors so that every community in Maryland has the chance to reach its full potential and our economy can grow and thrive.
In Maryland, and nationwide, household wealth is created and grown through three main categories: personal property like homeownership; savings such as retirement accounts; and assets that produce income such as business ownership, real estate, and stocks. These wealth generating avenues, paired with management of healthy debt, are encouraged through our tax policies and government investments. Unfortunately, these policies often exclude or limit access to wealth creation for Black, Latino, Asian, and Indigenous communities. The median home in majority Black neighborhoods is devalued by nearly $40 thousand. Sixty-five percent of white families have at least one retirement account compared to 44 % of Black families and 28% of Hispanic families. Black and Hispanic families typically have $2,000 or less in liquid savings while the typical white family has more than four times that amount. While there is no one-size fits all policy solution to solve the racial wealth gap in our state, the Comptroller can play a critical role, in partnership with the General Assembly, to pull policy levers that focus on addressing these key drivers of Maryland’s racial wealth gap.
As Comptroller, Brooke will create the role of Equity Officer. The Equity Officer will ensure that policies and practices take the wealth gap into account and are intentionally focused on reducing the gap. This senior position will consider all of the Comptroller’s work from procurement to tax collection to tax guidance and preparation services are equitable for every Maryland regardless of race, gender, ability, or background. The Equity Officer will also advise the Comptroller on issues related to the many government bodies Brooke will serve on including the Board of Public Works and the State Retirement and Pension System Board.
Rates of homeownership are the most significant factor driving the racial wealth gap in Maryland. Nationally, nearly three-fourths of white households own their home, while just over 40% of Black households are homeowners. Black Americans have the lowest rate of homeownership of any racial or ethnic group. This discrepancy, driven by past discriminatory public policy and commercial practices, is greater today than it was in 1960. In Maryland, the homeownership gap is around 25%. Black and brown borrowers are denied loans at a higher rate often due to lower credit scores, lack of down payments, or discriminatory lending practices. Black and brown homeowners often own property that is valued and assessed at lower rates than white homeowners and have larger loan amounts relative to property value, resulting in less equity. In the Baltimore metro-area, homes in majority Black neighborhoods were devalued, on average, by nearly 20%. Additionally, gaps persist in intergenerational transfers of property. Eliminating these gaps will help stabilize communities and contribute to a more thriving Maryland.
Over the last decade, banks operating in the State of Maryland have significantly increased their deposits while cutting back on small business loans. A recent report, for example, demonstrated that in Baltimore bank deposits nearly doubled from 2007 to 2016, reaching $26.5 billion, while the ratio of small business lending to deposits plummeted. If banks that take deposits in Baltimore had maintained the same ratio of small business loans to deposits in 2016 as in 2007, an additional $400 million of small business loans would have been made in 2016 in Baltimore, alone. Local and regional banks such as Howard Bank and Columbia Bank have a small business loan to deposit ratio of more than 6%, while larger banks like Bank of America, M&T, and Wells Fargo have a loan to deposit ratio of less than 1%. In an effort to encourage banks to increase their loan to deposit ratios, the Comptroller’s Office will track and publish these data at the individual bank level on an annual basis, and will work with banks through the Comptroller’s local offices to connect them with prospective small business borrowers. Read more about Brooke’s plans for supporting small business.
The Maryland Historic Revitalization Tax Credit is a successful program that puts Marylanders to work rehabilitating one of our state’s great assets – our historic commercial and residential building stock. The economic impact of these projects has an 8 to 1 return on investment for Maryland taxpayers. In the first twenty years, the program has created nearly 30,000 jobs and yielded more than $3.5 billion in economic activity. However, the annual appropriation has been slashed by nearly 70% over the past dozen years — with only $9 million available annually to support large, community-scale redevelopment projects across the state. Maryland is also falling behind its peers in supporting this kind of proven program. By comparison, Virginia invests nearly $100 million annually, and neighboring West Virginia now invests $30 million. But more needs to be done to make sure the program realizes its full potential, and that Maryland workers and communities are the ones who stand to benefit. By increasing the Historic Revitalization Tax Credit, Maryland can facilitate more and larger projects, while also requiring that a minimum percentage of construction jobs be sourced from laborers whose primary residence is in Maryland. As Comptroller, Brooke will support the expansion of this successful program. You can read more about Brooke’s ideas for strong, stable, and connected communities here.
As Comptroller, Brooke will work with the General Assembly to create a commission to study the home appraisal and assessment gaps in Maryland. This body will include representatives of the Comptroller’s office, the Department of Assessment and Taxation, the Department of Labor, the Maryland Commission of Real Estate Appraisers, Appraisal Management Companies and Home Inspectors, legislators, and outside experts. This group will examine inequities in home appraisals and in disproportionate fiscal burdens placed on communities due to differences in assessment and assessment appeals outcomes. Their goal will be to provide recommendations for shifts in agency and commercial practices and any necessary legislative policy solutions.
Will and estate planning is a critical aspect of a healthy financial lifecycle. Brooke will ensure that resources on these topics are available through the financial literacy services offered through the Comptroller’s regional offices. Brooke will highlight the work of the many Maryland organizations that provide free or low cost support to homeowners planning for their families futures. Read more about Brooke’s vision to support fair, competitive, and transparent tax administration.
Housing counseling is an important aspect of financial literacy. As part of the suite of services that the Comptroller’s Office provides through its regional field offices, Brooke will connect taxpayers interested in homeownership counseling with the many nonprofits and community development organizations that provide counseling services free of charge.
The racial wealth gap is driven by a large difference in household income. The Urban Institute reports that the median household income of Black households ($38k) are substantially lower than the median household income of white households ($61k). This contributes to large differences in rates of liquid savings and income-generating assets like stock. In 2015, the Federal Reserve notes that 56% of Black households held savings and 6% owned stock compared to 86% and 20%, respectively, of white households. The National Institute of Retirement Security (NIRS) finds that near-retirement people of color have savings of $30,000, on average, compared to $120,000 saved by white households. What income and savings households hold are used to service debt: mortgage, medical, student, and credit card debt among others. According to the Urban Institute, Black families, on average, have carried more student loan debt than white families, since the mid-2000s. This is driven in large part by the growing share of Black families that take on student debt. In 2016, 42% of families headed by Black adults ages 25 to 55 had student loan debt, compared with 34% of similar white families.
In response to the COVID-19 crisis, the Maryland General Assembly expanded the state’s earned-income tax credit (EITC) which is a benefit for working people with low to moderate incomes. The expansion included a child tax credit and covered filers with Taxpayer Identification Numbers which includes undocumented immigrants and certain survivors of domestic violence. As Comptroller, Brooke will call for the EITC to remain in its expanded form to provide continued relief to workers with low to moderate incomes. Read more about Brooke’s vision to support fair, competitive, and transparent tax administration.
Other states have created successful state facilitated retirement savings programs to encourage retirement savings for private sector employees. In 2016, Maryland followed that lead and created the Maryland Small Business Retirement Savings Program and Trust to administer the Maryland Saves program. The program is a publicly administered retirement savings plan for certain private-sector employers. This easy and affordable way to provide retirement benefits to employees formally launches in 2021. As Comptroller, Brooke will work with the program to ensure its success and strong participation across the state and serves the diverse set of residents in Maryland.
Rising costs of tuition and fees and larger debt loads are becoming a hardship for too many Marylanders. As a Board member of the Maryland 529 plan, Brooke will call for recruitment and performance targets to ensure that there is equitable access and participation to 529 savings plan and match programs. She will work actively to grow participation in the program from Black and brown households and households with incomes under $75k. She will also ensure oversight and transparency of the State’s Guaranteed Access Grant program. You can read more about Brooke’s plan for an excellent education for every student here
Sole proprietors, or schedule C tax filers, can have complicated tax situations and lack easy access to high-quality tax assistance. Many of these filers are people of color. In Baltimore City, people of color represent 60% of all sole proprietorships. As Comptroller, Brooke will roll out enhanced tax preparation assistance for sole proprietors throughout field offices in the state to ensure that these entrepreneurs are not being unfairly taxed. Additionally, the Comptroller’s regional offices can serve as support hubs for sole proprietors for financial literacy and business licensing resources.
Small businesses employ 47% of the U.S. workforce, create two-thirds of net, new jobs, and can provide important pathways to economic mobility and stability for all Marylanders, including for communities of color, via business ownership and employment. Today, however, Marylanders are struggling to access capital, and especially entrepreneurs of color are struggling to access capital, grow, and create jobs compared to their white counterparts. In 2018, just 5% of loans in the U.S. Small Business Administration’s main loan guarantee program went to Black-owned businesses and just 9% went to Hispanic-owned businesses. Black and brown businesses are also less likely to access financial support from friends and family and are woefully under-represented in venture capital and equity markets. These businesses are far more likely to fail in the face of financial strains, as has been demonstrated by the pandemic. Close to half, or almost 24,000 small businesses in Maryland are Black-owned businesses. The Federal Reserve Bank of New York reported that from February to April the number of Black businesses declined by 41%, indicating significant risks to sustained Black-owned business success in Maryland. You can read more about Brooke’s plans for supporting thriving small businesses and jobs here.
Startup companies rely on early seed stage funding to bring a product or service to the market. At this stage, companies are typically not generating income and can therefore not repay loans. They rely on venture capital investors who take an ownership stake in the company and friends and families who can extend capital on flexible terms. Due to a range of obstacles, from discrimination to the racial wealth gap, Black and brown business owners do not have access to this type of capital at the same rate as their white counterparts. After completing a disparity study to demonstrate need, Brooke will advocate for creating the MD Entrepreneurs of Color Venture Fund to be capitalized with a small percent of the state retirement system’s private equity portfolio and invest in seed stage and early stage companies in Maryland owned by entrepreneurs of color. In coordination with the new fund, the State of Maryland could expand the successful Cyber and Life Science investor tax credits to include venture capital and equity investments in any Maryland company owned by a person of color, with enhanced tax credits for investors investing in businesses located in distressed communities. Read more about Brooke’s plans for supporting small business.
The vast majority of small businesses, especially Main Street and industrial and manufacturing firms, are not in a position to access equity capital and instead seek bank loans and business credit cards after exhausting funds from friends, family, and personal savings. Mainstream banks and financial institutions base loan and credit card determinations on credit score and collateral availability, as a way for them to mitigate against risk. With lower credit scores on average and limited collateral availability, Black and brown businesses struggle to access these products. Alternative lenders, such as online lenders, community development financial institutions, and microlenders are more likely to extend capital to these businesses, but often at very small loan amounts that make it difficult for businesses to grow. The State of Maryland has the tools in the form of programs like the Maryland Industrial Development Finance Authority, the Maryland Small Business Development Finance Authority, the Neighborhood BusinessWorks Program, and the Video Lottery Terminal Fund to work alongside alternative lenders by guaranteeing first losses and enabling these lenders to make larger loans.
Maryland could use these programs to launch a first-loss guarantee loan program for alternative lenders. Rather than using these various programs to make direct loans as they are currently used, the State will guarantee the first 20% of losses for all loans made to businesses owned by economically or socially disadvantaged and especially those living in low-income census tracts. All loans that a given lender makes to qualified businesses will form a loan portfolio for purposes of this program, and the State will reimburse lenders for all of this portfolio’s losses up to 20% of the portfolio’s total value. Traditional banks, community development financial institutions, online lenders, microlenders, and other certified lenders will be allowed to participate. This program will be jointly managed by the Departments of Commerce and Housing and Community Development whose existing programs will be used as the guarantee pool. The Comptroller’s office will audit and monitor the program to ensure it is being implemented effectively and meeting loan targets. Read more about Brooke’s plans for supporting small business.
Procurement can be a valuable mechanism for leveling the playing field for Black and brown-owned businesses. As Comptroller, Brooke will use her seat on the Board of Public Works not only to ensure that we are meeting all MBE targets, but also to ensure our procurement regulations are resulting in best value for the state – not just the lowest price. Examining contracts and understanding not only what is being built but who is doing the building will be something Brooke takes seriously. State agencies will review current procurement goals for minority-owned businesses and look to increase these goals. To make contracting with the State of Maryland more accessible to Black and brown-owned businesses, the Comptroller will establish Procurement Centers in local offices to assist businesses with necessary certifications and bidding on State contracts. The Procurement Centers will actively recruit small businesses in their regions, connect them directly with state government procurers and create a robust mentor-protégé program with procurers and larger state contractors. Read more about Brooke’s plans for procurement reform.
Brooke supports the legalization, regulation, and taxation of cannabis. Maryland is lagging behind neighboring states in cannabis legalization. As we’ve seen from other states, legalization has had little to no impact on crime or traffic accidents, has created tens-of-thousands of jobs, and has created tens-of millions of additional tax revenue. Brooke supported efforts toward legalization as Delegate in the General Assembly. She believes that legalization must be accompanied by rigorous regulation and licensing, racial inclusion within the industry, and appropriate criminal justice reforms that include expungement and resentencing for cannabis related offenses.
Brooke will lead with a focus on equity as Comptroller. She knows that equity and racial justice are issues that impact every aspect of public service. Read more about her focus on equity in other planks of her policy platform.