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Revenue Issues Surrounding State and Local Reparations

Posted on July 3, 2023
Robert Tannenwald
Robert Tannenwald

Robert Tannenwald spent nine years as the adjunct lecturer in public policy and budgeting at the Heller School at Brandeis University, from which he retired in June 2020. He spent 28 years as an economist with the Federal Reserve Bank of Boston, from which he retired as vice president in 2010. He was the founding director of the bank’s New England Public Policy Center. He also served as a senior fellow at the Center on Budget and Policy Priorities and as an analyst in taxation at the Congressional Research Service.

In this installment of Economist’s Roost, Tannenwald discusses the prototype methods of funding reparations in Evanston, Illinois, to postulate how other states may follow or improve upon Evanston’s initial intentions.

When I taught public economics at Brandeis University’s Heller School, I offered my students the option of writing a term paper on financing reparations — payments to Black Americans for the damages caused by the legacy of slavery and systemic racism in the United States. I asked them to recommend federal tax changes designed to raise $1.5 trillion over 10 years. I chose the $1.5 trillion figure because it was roughly the estimated 10-year reduction in federal tax revenue resulting from President Trump’s tax cuts. Borrowing the funds was off the table because, when I assigned the paper, we had not yet studied debt financing.

In fall 2019, the last semester in which I taught the course, I surmised that if the reparations movement ever gathered steam, the federal government would take the lead. Yet while the movement has stalled in Washington, it has caught on in state capitals and city halls. Several subnational governments have acknowledged an obligation to compensate Black people for the damages inflicted on them by systemic racism. They have established public bodies charged with identifying past and present policies that have caused or exacerbated inequality and injustices, analyzing the nature and extent of the resulting damage, and formulating responses designed to redress grievances. A few have estimated the price of achieving justice and have already awarded some compensation.

If one assumes that reparations to Black people are desirable, to what extent should state and local governments, as opposed to the federal government, disburse them? Which subnational units have taken formal action? What actions has each taken? Where disbursements have been appropriated, what funding sources have been used and why? What tax issues has the form of disbursement raised, specifically unrestricted cash payments versus payment in kind?

Which Level of Government Should Fund Reparations?

Some of the most thorough, thoughtful, and articulate advocates of reparations have asserted that the federal government should take the lead. For example, William A. Darity Jr. and Andrea Kirsten Mullen have argued that the federal government must foot the bill because “it is the most capable and culpable party.”1 They suggest two alternative strategies for estimating the cost of restitution. First, “enumerate the atrocities, assign a dollar value to each, and add them up.” The authors reject this approach as unrealistic and unsatisfactory because the nation lacks a comprehensive record of all the harms inflicted and a method for translating them into monetary terms.

Their preferred method is to use Black-white wealth disparity as the best reflection of the minimum “cumulative impact of white racism over time.” They estimate that, after adjusting for the difference in the average size of white and Black households, the inter-racial disparity in wealth per capita is about $350,000. With an estimated 40 million living Black descendants of the roughly 4 million slaves emancipated in 1865, the total reparations bill comes to an estimated $14 trillion.2 Rep. Cori Bush, D-Mo., echoed that estimate in a resolution she introduced on the floor of the U.S. House of Representatives in May.3

By contrast, in state fiscal year 2020 state and local governments collected $3.6 trillion in general revenues.4 In 2020 U.S. personal income was $19.8 trillion.5 Thus, if subnational units footed the bill for reparations in one year by raising taxes, fees, and charges, collectively they would have to raise their own-source revenue burden from 18 percent to 71 percent. If they tried to raise the $14 trillion over an extended period, even an ambitious effort would take several decades unless they decimated services.

As for culpability, many analysts, advocates, and scholars, including Darity and Mullen, place the blame for the Black-white wealth gap primarily on the shoulders of the federal government. The Constitution, as originally ratified, legitimized slavery, allowed the importation of slaves until 1808, weighted slaves only three-fifths as heavily as freedmen in determining the allocation of seats in the House of Representatives, and mandated the capture and return of fugitives fleeing from slavery.6 In an article published in The Economist, Darity and Mullen identify four post-Civil War phases of federal “asset-building and asset-destroying” policies and practices responsible for perpetuating the wealth gap. In the first phase — the “wagon train” period, occurring mostly during the 19th century — Washington fostered private wealth creation by allocating land, primarily under the Homestead Act of 1862. Most Black households were excluded from those federal benefits. Roughly 4 million formerly enslaved people never received the 40 acres of farmland promised to each family in 1865 in a military order issued by Union Gen. William T. Sherman, approved by President Abraham Lincoln but later rescinded by President Andrew Johnson.7 In the western territories, white settlers received land grants on average four times as large as their Black counterparts. The federal government did little, if anything, to enforce the postbellum amendments to the Constitution intended to enable the formerly enslaved and their descendants to enjoy the rights of full citizenship.

During the second phase — identified by Darity and Mullen as the “blood lust” period between the end of the Civil War and through World War II — white mobs perpetrated nearly 100 massacres, murdering Black people and taking their property. In the “picket fence” period, the federal government built private wealth through the promotion of homeownership in a highly discriminatory fashion, helping white individuals to build wealth much more than Black people. In the final phase — the “freeway” period — the federal government built the interstate highway system during the 1950s and 1960s, running highways through Black neighborhoods in many cities, thereby destroying Black business districts and stable Black communities.8

Darity and Mullen assert that state and local efforts to make reparative payments have hurt the cause of reparations and will continue to do so because they distract supporters from the necessity of federal funding and acknowledgment of nationwide collective responsibility. The authors exhort state and local advocates to use their scarce resources to lobby Congress for federal funding instead of financing limited, piecemeal, inadequate awards.9

As the Economic Policy Institute’s Kyle R. Moore notes, the nation lacks the collective political will to support reparations, especially on the scale advocated by Darity and Mullen. Yet, because pockets of support have emerged in some states and municipalities, he argues (correctly, I think) that a state and local reparative program can be a valuable complement to a federal initiative if it tries to accept responsibility and redress harm caused by specific inequities and injustices perpetrated by the government. The scope of a subnational program should be tailored to the resources realistically available to the state or local entity. No state or local plan should absolve the federal government of its responsibility to compensate victims for the damage that it has caused.10

Evanston, Illinois: A Case Study Revealing Challenges Confronting Subnational Reparations

Evanston, Illinois, was the first subnational government to commit funds to reparations for Black people and to specify sources of funding. Its experiences have illustrated many of the tax-related difficulties that subnational entities have faced and will continue to face as they design their programs.

The city’s program began with the creation of an Equity and Empowerment Commission in early 2018 to “identify and eradicate inequities in City services, programs, human-resource practices, and decision-making processes.”11 Upon the recommendation of that commission, the Evanston City Council passed a resolution in November 2019 committing $10 million to reparations (to be spent over 10 years), identified the local option tax on recreational cannabis products as the principal funding source, and established a reparations subcommittee to study and recommend proposals for disbursing reparative payments.12

The city decided to rely on that revenue source in large part because it was a way to compensate Black people for the city’s alleged excessive and discriminatory policing of their marijuana use. According to Rue Simmons, a city council member and pioneer in the city’s reparations movement, Black people account for 71 percent of city arrests for marijuana violations but only 16 percent of the population.13 In a resolution adopted in 2021 the NAACP, asserting the ubiquity of such discrimination, called for, among other things, greater African American employment and business ownership in the cannabis industry.14

Illinois legalized the use of recreational marijuana starting January 1, 2020. Evanston officials were cautiously optimistic that the cannabis tax would generate sufficient revenue to fund the $10 million program, given that as of July 2022 the state had issued 119 conditional cannabis dispensary licenses in the Evanston area. However, officials did not anticipate that, as of the writing of this column, only one dispensary would have opened its doors in Evanston. Apparently, most of the city does not offer viable locations in the eyes of conditional license owners. The dispensary set up shop at a premium downtown site, where it benefits from foot traffic and an adjacent garage. Given the ineffectiveness of past recruitment efforts, and the burdensome bureaucratic red tape involved in getting a license and opening a store, the city’s economic development manager is not optimistic about attracting other dispensaries anytime soon.15

As of March 2023, the city had made only $326,836 in reparations grants, spread among only 14 recipients. As frustration has mounted, the city’s Reparations Committee has considered two alternative funding sources: the local option real estate transfer tax and the surplus in the city’s general fund. Corporation Counsel Nicholas Cummings advised against using general fund money because doing so would increase the chance that the city’s program could be successfully challenged in court. He noted that, because the general fund is designated for use by all citizens, using part of it to fund reparations — a program explicitly benefiting citizens of only a certain race — could violate the U.S. Constitution’s equal protection clause.16 Despite Cummings’s advisory opinion, in December 2022 the city council reserved $2 million from the general fund and $1 million of its real estate transfer tax for reparations.17

While funding the city’s reparations program has raised thorny tax issues, so has the form that those payments have taken. In accordance with Moore’s recommendation that state and local reparations be focused on specific injustices, the city has decided to concentrate on damage caused by discrimination in local housing policy since 1919. As a result, until a few months ago, reparations awards took the form of housing assistance, not cash. Grants could be used to improve a home, make a down payment on one, or pay down a mortgage. A recipient must be Black, have lived in Evanston between 1919 and 1969 or be a descendent of such a person, or be able to provide proof of having suffered from discriminatory housing policies or practices since 1969.18

Until March 2, the Reparations Committee stuck to its plan of providing only housing assistance because the governing resolutions stipulated that the program should focus on damage inflicted by discriminatory public policies and practices related to homeownership. The commission shied away from making cash grants in part because Cummings warned that they could be taxable under federal and state laws. However, the commission made an exception for a brother and sister in their 70s who otherwise would have lost access to their compensation because they didn’t own a home, thought that purchasing a home was not feasible or advisable given their age, and had no direct descendants to whom they could transfer their grants.

Some commission members are concerned that more recipients (all of whom are chosen randomly from a pool of eligible applicants) might face similar dilemmas. Several recipients had died before the commission processed their applications and disbursed their grants. Consequently, the commission asked Cummings to revisit the taxable income issue. He, in turn, sought further advice from private tax attorneys. Some of those attorneys suggested that a reparative cash grant might not be taxable if it could be shown to be related to need. (Cummings was unsure about the relevant federal and state tax income tax laws, regulations, and court opinions that his private-sector advisers thought might render cash reparations tax exempt.)19 However, after Cummings modified his opinion, the committee and city council authorized cash payment as a fourth reparative option.20

Other State and Local Reparations Programs

Only a handful of other subnational governments have made reparative payments or have appropriated funding for them. Others have created task forces that have held hearings and town halls, collected data, and issued reports and recommendations, including, in some cases, estimates of just restitution costs. Still others are considering the establishment of reparations task forces.

Amherst, Massachusetts

The town council passed a resolution in December 2020 to “end structural racism and achieve racial equity for Black Residents.” The resolution listed instances of racial discrimination in Amherst, such as a vote by selectmen in 1762 to order Black residents out of town, the inability of the first Black faculty member at UMass Amherst to find housing in 1948, and the previous existence of racial housing covenants. In June 2021 the council created a reparations fund, established the African American Reparation Assembly, and directed the assembly to study and to develop reparative proposals by June 2023. In June 2022 the council authorized the transfer of $2 million to the fund over several years, and the earmarking of up to $205,000 in receipts annually from the town’s cannabis tax for that purpose. Enabling legislation justified using receipts from that revenue source because of past racial inequities in the enforcement of anti-drug legislation.21

Asheville and Buncombe County, North Carolina

In July 2020 the Asheville City Council passed a resolution supporting reparations for Black residents. It established a reparations commission to recommend a reparative agenda.22 Since the Board of Commissioners of Buncombe County, in which Asheville is located, passed a similar resolution two months later, the commission was made a joint city-county entity. In July 2021 Asheville allocated $2.1 million from the sale of city-owned property that had been acquired as part of its urban renewal program in the 1970s, a program that was thought to have harmed the city’s Black community.23 The city also approved a recurring $500,000 annual appropriation to the commission. Buncombe County committed $2 million to the commission in its fiscal 2023 budget and, like Asheville, an additional $500,000 annually (increased 2 percent per year).24

Rosewood, Florida

In early January 1923 a white mob decimated the Black community of Rosewood, killing dozens of Black residents and destroying property. In 1994 Florida recognized its negligence in failing to intercede or even to investigate the event, and authorized reparations. Any Black person who owned property in Rosewood at the time of the riot was awarded $150,000. A pool of $500,000 was created to fund college scholarships for any descendent of these property owners.25

Burlington, Vermont

The Burlington City Council passed a resolution establishing a reparations task force in August 2020. Although members have been selected and the task force has been deliberating, it has yet to make concrete recommendations.26 A private effort to solicit funds for reparations from donors raised about $65,000.27

St. Louis

Per an executive order, the mayor established the St. Louis Reparations Commission in early 2023 to study the history of “slavery, segregation, and other race-based harms in the City of St. Louis,” and eventually to recommend a plan “to begin to repair the harms that have been inflicted.”28


The Boston City Council established a task force on reparations in 2022 to study the legacy of slavery in the city and its impact on descendants, to engage the community throughout the process, and make proposals to the mayor for reparative justice.29

Providence, Rhode Island

On July 15, 2020, the mayor signed an executive order committing the city to a process of “truth-telling, reconciliation, and municipal reparations process for Black, Indigenous (Indian) People, and People of Color in Providence.”30 The city conducted a study of its role in supporting slavery and perpetuating its legacy. It engaged in extensive community outreach and engagement over racial injustice. Later, the mayor established, again by executive order, the Providence Municipal Reparations Commission to recommend reparations measures and processes.31 In November 2022, the mayor and city council approved $10 million for reparations programs funded with federal money given the city under the American Rescue Plan Act. Federal rules stipulate that programs financed with act funds must be race neutral. Thus, some reparations activists have claimed that the city’s program is not truly reparative because eligibility for payments is not limited to Black people.32

St. Paul, Minnesota

The city council established the St. Paul Recovery Act Community Reparations Commission in January, charging it with advising the council and the mayor on “repairing the damage caused by systemic racism in the City of St. Paul.”33

Greenbelt, Maryland

In November 2021 voters passed a measure establishing a commission to explore reparations for Black and Native American residents of the city. Members of the commission were appointed in December 2022.34

San Francisco

In December 2020 the city’s Board of Supervisors enacted an ordinance establishing the San Francisco African American Reparations Advisory Committee. The committee was charged with addressing “the institutional, city-sanctioned harm that has been inflicted upon African American communities.”35 In March 2023 the committee recommended over 100 reparative measures that included a $5 million payment to each eligible Black adult, complete forgiveness of personal debt, an annual income of $97,500 for 250 years, and the right to buy a home within city limits for $1. The committee did not recommend a method of funding. The Board of Supervisors has agreed to accept the committee’s recommendations in principle but deferred final approval and funding decisions until after the committee released its final report in June.36


California is the only state that has created a reparations task force, prepared an in-depth analysis of the harms imposed on Black people from systemic racism and the legacy of slavery, quantified the cost of each harm, and crafted a comprehensive reparative plan. Founded in September 202037 the state’s task force voted on its final recommendations in May, which are contained in a 492-page interim report. Unlike Darity and Mullen, the task force decided to specify every inequity suffered by Black people and traceable to state policies since California became a state in 1850 and, based on advice from a wide array of experts, quantified the monetary cost of each.38 For example, it estimated the cost of each year of human life, accounting for white-Black differences in life expectancy ($13,619), and the diminished wealth attributable to depressed rates of home ownership ($148,099). The total cost of the recommendations was estimated to run as high as $800 billion, or $1.2 million per eligible recipient. By contrast, the California Legislative Analyst’s total state revenue forecast for fiscal 2024 is $208.3 billion.39 As of this writing, the task force was scheduled to transmit its final report to the Legislature June 29.40

Shelby County, Tennessee (Includes Memphis)

In February 2023 the Board of County Commissioners passed a resolution appropriating $5 million to study reparations for descendants of slaves and to find “actionable items” in the areas of access to affordable housing and homeownership, parity in healthcare, criminal justice reform, improvements in career opportunities, and financial literacy and generational wealth.41


1 William A. Darity Jr. and Andrea Kirsten Mullen, From Here to Equality: Reparations for Black Americans in the Twenty-First Century, xiii (2022).

2 Id. at xi-xii.

3 H.B. 414. 118th Congress (2023).

4 U.S. Census Bureau, “Annual State and Local Government Finances Summary” (Sept. 22, 2022).

5 Bureau of Economic Analysis, “Table 2.1. Personal Income and Its Disposition” (May 25, 2023).

6 See U.S. Const. Art. I, sec. 2, para. 3; Art. I, sec. 9, para. 1; Art. IV, sec. 2, para. 3.

7 The idea for that redistribution of land — approximately 400,000 acres previously owned by slaveowners — came from prominent Black ministers in a meeting between Sherman and then-Secretary of War Edward M. Stanton. When the two asked how the federal government could best help formerly enslaved people, the ministers said to give freedmen and their families land, protection, self-government, and exclusion of white residents. All those policies were authorized in Sherman’s order (Sherman later added that the Union Army could lend the settlers mules, hence the phrase “40 acres and a mule”). President Andrew Johnson overturned the order and returned all the transferred land to its previous owners, evicting tens of thousands of freed men and women who had already occupied some of the land. See Henry Louis Gates Jr., “The Truth Behind ‘40 Acres and a Mule,’” PBS, Jan. 7, 2013.

8 Darity and Mullen, “Race in America: Reparations,” The Economist, May 18, 2021.

9 Darity and Mullen, supra note 1, at xv-xvi.

10 Kyle K. Moore, “Five Principles for Making State and Local Reparations Plans Reparative,” Economic Policy Institute (Feb. 15, 2023).

11 City of Evanston, Equity and Empowerment Commission (2023).

12 In June 2019, the city council passed a resolution acknowledging its past racist practices and vowing to end them. Admission of guilt and rectification of past inequities are considered an important component of any reparations effort, regardless of the level of government.

13 Debbie-Marie Brown, “Evanston Leaders Discuss Reparations With Northfield Temple,” Evanston Roundtable, Apr. 26, 2022.

14 NAACP, 2021 Resolutions, at 10.

15 Gina Castro, “Evanston’s Historic Reparations Program: A 101 Guide, Part 3,” Evanston Roundtable, Sept. 21, 2022.

16 Brown, “Reparations Committee Argues About Legal Funding Streams,” Evanston Roundtable, June 3, 2022.

17 Castro, “City Plans Up to 80 More Grants in Second Round of Reparations,” Evanston Roundtable, Mar. 9, 2023.

18 Brown, “Evanston’s Historic Reparations Program: A 101 Guide, Part 2,” Evanston Roundtable, Sept. 6, 2022.

19 See telephone conversation with Nicholas Cummings (May 19, 2023).

20 Castro, “Reparations Committee Discusses Details of Cash Payments,” Evanston Roundtable, Apr. 6, 2023.

21 Jennifer Cavanaugh, “Amherst Explores Reparations at the Municipal Level,” Massachusetts Municipal Association (Dec. 2022).

22 Brittany Valentine, “Asheville, N.C. Will Give Reparations to Its Black Community,” Al Día, July 17, 2020.

23 Staff reports, “Asheville City Council Makes Initial $2.1 Million in Reparations,” The Urban News, June 16, 2021.

27 Nora Peachin, “Vermonters Find Reparations Work ‘Painful and Messy and Complicated,’Burlington Free Press, July 26, 2021.

28 St. Louis City Reparations Commission, “Details About the St. Louis City Reparations Commission” (undated).

29 City of Boston, Task Force on Reparations (June 12, 2023).

32 Gabriella Abdul-Hakim et al., “Providence Establishes Reparations Program to Praise and Criticism,” ABC News, Jan. 31, 2023.

34 Susan Taylor, “City Council Names Members of Reparations Commission,” Greenbelt News Review, Dec. 22, 2022.

37 American Civil Liberties Union of Northern California, “Gold Chains: The History of Slavery in California — Investigating California’s Complicity in Slavery” (2019).

38 California Office of the Attorney General, Interim Report Executive Summary (June 22, 2022).

39 California Legislative Analyst’s Office, The 2023-2024 Budget: California’s Fiscal Outlook, at 14, fig. 3 (Nov. 16, 2022).

41 Alicia Victoria Lozano, “Tennessee’s Largest County to Study Reparations for Descendants of Enslaved People,” NBC News, Feb. 22, 2023.


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