The Wealthy Become Wealthier

 

THE HYPOCRISY OF PHILANTHROPY

Elon Musk's wealth has surpassed $200 billion. It would take the median U.S. worker over 4 million years to make that much.

During the first 19 months of the pandemic, U.S. billionaires added $2.1 trillion dollars to their collective wealth and that number continues to rise. 

Jeff Bezos paid no federal income taxes in 2007 or in 2011.

 By 2018, the 400 richest Americans paid a lower overall tax rate than almost anyone else. 

The Trump tax cut enabled individuals to exclude $11.18 million from their estate taxes. That means one couple can pass on more than $22 million to their kids tax-free. Not to mention the very rich often find ways around this tax entirely. As Trump's former White House National Economic Council director Gary Cohn put it, "only morons pay the estate tax."

What about capital gains on the soaring values of wealthy people's stocks, bonds, mansions, and works of art? Here, the biggest loophole is something called the "stepped-up basis." If the wealthy hold on to these assets until they die, their heirs inherit them without paying any capital gains taxes whatsoever. All the increased value of those assets is simply erased, for tax purposes. This loophole saves heirs an estimated $40 billion a year.

This means that huge accumulations of wealth in the hands of a relatively few households can be passed from generation to generation untaxed—growing along the way—generating comfortable incomes for rich descendants who will never have to work a day of their lives. That's the dynastic class we're creating right now.

Wealth inequality in America is far larger than income inequality. 

Income is what you earn each week or month or year. Wealth refers to the sum total of your assets—your car, your stocks and bonds, your home, art—anything else you own that's valuable. Valuable not only because there's a market for it—a price other people are willing to pay to buy it—but because wealth itself grows. Wealth compounds over time.

 Personal wealth comes from two sources. The first source is the income you earn but don't spend. That's your savings. When you invest those savings in stocks, bonds, or real property or other assets, you create your personal wealth— which, as we've seen, grows over time. 

The second source of personal wealth is whatever is handed down to you from your parents, grandparents, and maybe even generations before them—in other words, what you inherit. The Waltons—the family behind the Walmart empire— has seven heirs on the Forbes billionaires list. Their children, and other rich millennials, will soon consolidate even more of the nation's wealth. America is now on the cusp of the largest intergenerational transfer of wealth in history.

As wealthy boomers pass on, somewhere between $30 to $70 trillion will go to their children over the next three decades. These children will be able to live off of this wealth, and then leave the bulk of it—which will continue growing—to their own children - tax-free. After a few generations of this, almost all of America's wealth could be in the hands of a few thousand families.  Dynastic wealth continues to grow. Dynastic wealth creates a self-perpetuating aristocracy.

In the 1970s, the wealthiest 1 percent owned about 20 percent of the nation's total household wealth.

 Now, they own over 35 percent. 

Much of their gains over the last 40 years have come from a dramatic increase in the value of shares of stock. 

For example, if someone invested $1,000 in 1978 in a broad index of stocks—say, the S&P 500 — they would have $31,823 today, adjusted for inflation. 

Who has benefited from this surge? The richest 1 percent, who now own half of the entire stock market. 

But the typical worker's wages have barely grown. 

Most Americans haven't earned enough to save anything. 

Before the pandemic, when the economy appeared to be doing well, almost 80 percent were living paycheck to paycheck

Most Americans don't make enough to save money and build wealth.

 Wealth concentration magnifies gender and race disparities because women and people of color tend to make less, save less, and inherit less.

The typical single woman owns only 32 cents of wealth for every dollar of wealth owned by a man. The pandemic likely increased this gap. 

The racial wealth gap is even starker. The typical Black household owns just 13 cents of wealth for every dollar of wealth owned by the typical white household. The pandemic likely increased this gap, too. 

Opinion | The Cruelest Form of Capitalism in the World | Robert Reich (commondreams.org)