Is the Black tax a barrier to building wealth or just another bill?

There are lots of obstacles Black professionals and entrepreneurs face — a wage gap, a funding gap, and plenty of discrimination. 

“There’s also an unspoken challenge while trying to build their companies, their career, or their wealth. A common phenomenon that some refer to as the ‘Black tax’,” Brittany Oliver wrote in Fast Company last year.

Generally speaking, the term refers to the money Black professionals are expected to give every month to support their parents, siblings and other relatives (dependants) and implies that white professionals don’t have the same level of familial responsibility.

Some may see it as the price you have to pay to family for the sacrifices they made that contributed to your success — a return on investment. While others see it as a responsibility or duty ingrained in their culture — an honourable contribution to the community or an opportunity to pay it forward. 

Co-hosts of Girl in Skies Podcast, Natasha Fuyane, and Xolie Ncube, address this complicated tradition in an episode of their show, which ended up spilling into a lively Twitter debate.  

“There are legitimate concerns about the burden it can cause which impacts a person’s ability to build for their future,” Fuyane told LowestRates.ca in an email.

“Overall, our sense of duty to family is a special part of our culture which I wouldn’t change.” 

Ncube added, “I have never seen it as a curse, but I would be lying if I said it was a blessing."

Black tax has the ability to halt you on achieving things you may desire. However, in that same breath, I would struggle to enjoy my achievements if my family was struggling back home

Whether it’s a tax fuelled by guilt (some were benefactors themselves) or a sense of responsibility, many Black professionals are faced with the reality that a significant portion of their paycheck must go to dependents.

“Because people don’t see it as another bill, we don’t actually plan for it,” said Moses Mutabaruka, founder of The African Perspective Magazine.

“It becomes a burden when individuals don’t have the proper financial literacy to differentiate between what they can and can’t afford.”

Why the tax disproportionately affects Black people

Mark Hunter, a University of Toronto associate professor and author, first came across the term, black tax in South Africa back in 2010 and it exploded on social media around 2015. Hunter’s understanding is that the term is contested because it’s naming something that’s always happened — which is that some wage earners support their families. 

“There's a debate about whether it should be used. Some people say, ‘why are you calling this the black tax? Why is buying my mom a new washing machine considered as a black tax when my mom made all these sacrifices for me’?” Hunter said. 

Many immigrants, no matter the race, look after their families in their country of origin. For example, many women from the Philippines come to work in Canada under the live-in caregiver program and send substantial earnings to relatives or friends back home.

According to Statistics Canada, remittances — mainly used to pay for living and medical expenses back home — play an increasingly large role in the economies of small and developing countries and reportedly reached an all-time high in 2018. 

Driven by a rising migrant population, Canadians sent abroad $5.2 billion in 2017. Immigrants from the Philippines, India, Jamaica, Haiti and Nigeria top the list of those sending money back home.

The racial wealth gap hits Blacks hard 

There is little Canadian data when it comes to examining wealth according to race. However, a report from the Conference Board of Canada showed that for every dollar earned by a white worker, Black workers earned about 80.4 cents. 

“A difference in wages means a difference in the ability to save and invest—–amplifying the wealth gap over time, thanks to the power of compounding," Karen K. Ho recently wrote in an article for Wealthsimple about the problem. 

We also know that racialized populations and newcomers in Toronto have seen no inflation-adjusted growth in their incomes in the last 30 years.

The average income for a racialized person in Toronto in 2015 was $39,200, while the average income for a white person in the city in 2015 was $75,200 (in 2015 dollars)

In addition, we’ve reported that of all the ethnocultural groups, Black workers are more likely to be the “working poor” despite historically low unemployment levels and a robust job market in Toronto.

But even Black people with higher-paying jobs are subject to black tax or the feeling that their money isn't just their money.

“Many Blacks in my peer group are making good money, but because they’re the first person in their family to “make it”, they are still living paycheck-to-paycheck because their money isn’t just their money. Their money is mom’s light bill money, little bro’s football money, etc,” tweeted Sheena Allen, CEO of @GoCapWay, a fintech organization.

There is a lot to be said about Black tax but it’s crucial anyone, especially breadwinners, have emergency savings a.k.a money you put aside to have in case something unexpected happens. 

This fund will protect you from future debt and help to sustain the balancing act between supporting family members and trying to build a life for yourself.

Fuyane suggests you look at your spending and be realistic. 

“I found it helpful to be consistent with the little I could afford than to send large amounts inconsistently. This also doesn’t help the recipient.” 

Ncube added, “I think it’s important to set out a budget and identify those in the family you want to help out as you can’t help everyone. It’s important to learn to say no and to be protective of yourself and your needs. You are important too.”