Here’s an often-cited fact about wealth disparity in the United States: The top 1% of the country owns more wealth than the bottom 90% does combined. But let’s put some faces to the numbers, shall we? To begin with, the three wealthiest people in the United States–Bill Gates, Jeff Bezos, and Warren Buffett–own more wealth than the bottom half of the country combined. Equally concerning: Three families–the Waltons, the Kochs, and the Mars–own a combined fortune of $348.7 billion, more than 4 million American families who possess the median wealth in the country.
The super-wealthy, self-made men of the Bezos variety, are representative of the pernicious way that capitalism funnels money toward people who need it the least. The inherited wealth of people like the Waltons show that this is something that has been happening over time, and has yet to be broken.
Dynastic wealth and the disturbing inequities it perpetuates are the subject of a recent report from the Institute for Policy Studies, a progressive think tank, which is appropriately titled, “Billionaire Bonanza 2018: The Role of Dynastic Wealth.” In compiling the report, coauthors Josh Hoxie and Chuck Collins dove into the Forbes 400 list, and found that one-third of the members have inherited wealth from previous generations. The 15 wealthiest families (who each have multiple members on the Forbes 400 list) account for a combined wealth of $618 billion.
When reading “Billionaire Bonanza 2018,” it’s difficult to know where to start. Do you talk about the fact that the wealth of the Walton family alone increased from $690 million in 1982 to $169.7 billion in 2018–an unfathomable leap of 9,257%, and one of the few times I’ve spelled out a percent change with a comma? Or do you look to Jeff Bezos, whose individual fortune of $160 billion is now nearly equivalent to that of the entire Koch family?
The key, ultimately, is to understand all of these facts in context. “Intergenerational wealth is one of the least talked about, but probably one of the most important drivers of inequality in the U.S.,” Hoxie says. Over the decades, wealthy families like the Waltons and the Kochs have accumulated wealth through their businesses. Reduced taxes on the wealthy and on corporations, as well as the growing practice of stock compensation, have enabled such families to hold onto their wealth, “and shield their assets from society,” Hoxie says. The same system is buffering Bezos’s steep wealth trajectory–and will enable him to transmit it to his children, beginning a new wealth dynasty. Meanwhile, these same systems that benefit the wealthy–tax breaks and shareholder returns–are trapping regular, working class people. Median household wealth in the U.S. has actually declined 3% since 1983 (as the Walton’s wealth reached nearly five-digit percent growth). Income growth across that same time period, for non-1%-ers, has also flatlined.
A big issue is that in this current economic landscape, young people entering the workforce stand very little chance of outperforming their parents economically. That used to be a given: A kid born in 1940 had a 92% chance of earning more than their parents. Now, someone born in 1980 has just a 50% chance–despite the fact that worker productivity has risen 77% since 1973. “The question I come back to is always: Where do all those economic gains go?” Hoxie says. The answer: To the people already at the top, who are then able to transfer their wealth down to their children and keep the cycle going. Inherited wealth in the U.S. is not taxed, so wealthy families are essentially able to maintain a pipeline of funding for their future generations without having to contribute any of it to society.
Calling for a change to this dynamic is the underlying point of the “Billionaire Bonanza 2018” report. “There are programs that we don’t have that we should have that would directly address this problem,” Hoxie says. The report outlines two of them. One solution is a direct tax on the top 0.1% of households in the U.S. The Institute for Policy Studies calculates that a 1% tax on this upper echelon, with a wealth of over $20 million, would generate $1.899 trillion in revenue over the next decade.
The other is a tax on wealth transferred between generations. The report cites the work of New York University professor Lily Batchelder, who has estimated that inheritances make up around $4 out of $10 of all household wealth. She proposes extending income taxes (with an additional surcharge of 15%) to capture inherited wealth. Even if the first $2.1 million a person inherits is kept tax-free, the proposal could generate around $200 billion in a decade. Senator Elizabeth Warren (D-MA), similarly, has proposed strengthening the inheritance tax specifically to address the affordable housing crisis in the U.S.
“The worst possible takeaway from reading this report is the sense that this is just how the economy is, and there’s nothing we can do about it,” Hoxie says. What “Billionaire Bonanza” makes clear is that there is more than enough money out there in the U.S. economy to address our most pressing concerns, from housing affordability to good public education to everyday pressures on people who haven’t seen their wages rise in years. Right now, though, it’s concentrated in the hands of people so sheltered from the stress of existing in the contemporary economy that they see no reason to change the system.
The U.S., the “Billionaire Bonanza” report reminds readers, has a strong tradition of breaking up concentrated wealth. Theodore Roosevelt famously said: “Of all forms of tyranny, the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy,” following the first Gilded Age. Now that we’re well into the second, we need bold policy solutions to redistribute the country’s vast economic resources in a way that benefits everyone from the bottom up, not just those already sitting at the top.