America’s three wealthiest families have seen their wealth grow nearly 6,000 percent in just one generation, according to a recent report, while median household wealth since 1982 went down 3 percent.
Josh Hoxie, director of the Project on Taxation and Opportunity at the Institute for Policy Studies, writes in Fortune:
American wealth dynasties are on the rise as the heirs and heiresses of family fortunes watch their wealth skyrocket. Meanwhile, most families struggle to make ends meet.
A new report I co-authored, Billionaire Bonanza 2018, looks at rising wealth inequality with an eye toward solutions. Included in our key findings is the fact that the three wealthiest families in the U.S.—the Waltons (Walmart), the Kochs, and the Mars—have seen their wealth increase nearly 6,000% just in the past generation.
How did we get here?
The simplified explanation:
In the wake of the last Gilded Age—the period from the 1890s to the late 1920s when inequality rivaled periods we see today—reformers used the tax code to break up the immense wealth dynasties of that era. They passed the federal estate tax, a levy on the intergenerational transfer of wealth, in 1916, and instituted high marginal income tax rates on the wealthy, spiking from 25% in 1931 to 63% the next year, and rising as high as 94% on the richest households in 1944 and 1945.
What followed was a great shift in wealth ownership from very unequal to fairly egalitarian from the 1930s to the 1980s—and then a great shift back from the 1980s to today, where we’re basically where we started at the peak of the last Gilded Age.
The shift back came as billionaires like the Kochs used their immense fortunes to push for massive tax cuts, like the Bush tax cuts in the early 2000s, and the Trump tax cuts more recently. (Indeed, on the day after the House voted on the Trump cuts, the Koch brothers handed over a half million dollars to one of the architects behind the bill, House Speaker Paul Ryan.)
What can be done?
Hoxie focuses primarily on two moves within the tax code to tackle the issue.
The first is to tax extreme wealth directly—specifically, with a 1% tax on the assets of the wealthiest 0.1% of households, those with assets greater than $20 million. Such a wealth tax would raise nearly $1.9 trillion over the next 10 years, according to forthcoming research from the Institute on Taxation and Economic Policy that was shared with me.
The second idea is to tax large inheritances as ordinary income. The existing federal estate tax was designed in part to do that, but it’s been riddled with billionaire loopholes and weakened by outsized exemptions. Among these loopholes is the grantor retained annuity trust, which has been used by billionaires such as Sheldon Adelson and Donald Trump to dodge estate taxes. The tax lawyer who discovered the loophole estimated in 2013 that it was responsible for over $100 billion in lost tax revenue since 2000.