On October 30, 2018, Chuck Collins and Josh Hoxie write on Inequality.org:
Wealth in the United States is concentrating into fewer and fewer hands, a trend we tracked in two previous Billionaire Bonanza reports in 2015 and 2017. This year’s edition, Billionaire Bonanza 2018: Inherited Wealth Dynasties in the 21st-Century U.S., focuses primarily on “dynastic” wealth that has passed from one generation to another within families. Our analysis is based on the Forbes magazine list of the 400 wealthiest individuals in the United States and the Federal Reserve Survey of Consumer Finances.
“The central issue is we’re developing into a plutocracy. We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive. And they don’t like government, and they don’t like to pay taxes.”
PAUL VOLKER, FORMER CHAIRMAN OF THE FEDERAL RESERVE
In this report, we analyze the grand fortunes of the wealthiest individuals and families and compare their wealth to the absence of wealth at and near the nation’s economic bottom.
Our findings show a deeply unbalanced economy:
- Three dynastic wealth families—the Waltons, the Kochs, and the Mars—have seen their wealth increase nearly 6,000 percent since 1982. Meanwhile, median household wealth over the same period went down by 3 percent.
- These three wealth dynasties own a combined fortune of $348.7 billion. That’s more than four million times the median wealth of U.S. families.
- The dynastic wealth of the Walton family grew from $690 million in 1982 (or $1.81 billion in 2018 dollars) to $169.7 billion in 2018, a mind-numbing increase of 9,257 percent.
- Three individuals—Jeff Bezos, Bill Gates, and Warren Buffett—still own more wealth than the bottom half of the country combined.
- A third of the members of the Forbes 400 own fortunes derived from companies that were founded by earlier generations.
- The 15 wealthiest multi-generational dynastic families on the Forbes 400 own a combined $618 billion. Their parents or other ancestors founded all of the companies from which their wealth is derived.
- The Forbes 400 combined own $2.89 trillion dollars, more than the combined wealth of the bottom 64 percent of the United States. It’s also more than the GDP of Britain, the 5th-largest economy in the world. Just 45 individuals own half of this wealth.
- The median family in the United States owns just over $80,000 in household wealth. The richest person in the United States (and the world), Jeff Bezos, has accumulated a fortune nearly 2 million times that amount.
- The Bezos fortune expanded by $78.5 billion just in the last year to $160 billion. Even at the recently increased wage of $15/hour, a full-time Amazon worker would need to toil for 2.5 million years to generate this much money.
READ THE FULL REPORTBillionaire Bonanza 2018
A century of family growth, progressive taxation, and philanthropic activity has dispersed these great fortunes. Only a handful of heirs to these original Gilded Age fortunes rank among the Forbes 400 today. But current public policies have reduced taxes and goosed stock values, buoying some of these older wealth dynasties as well.
Now several decades into the second Gilded Age, dynastic wealth families once again appear in force on the Forbes 400 list. And like previous dynasties, a segment of these families use their considerable wealth and power to rig the rules of the economy to protect and expand their wealth and power.
Members of the Forbes 400 span the spectrum of inheritance with some inheriting their full fortune while others started their life in impoverished families. Most of the list exist somewhere in between with the privileges and benefits that come from intergenerational transfers of wealth. Forbes quantifies this distinction listing 64 members as inheriting their full fortune and 67 members inheriting a smaller fortune they grew. The rest, 269 members, are listed as “self-made.”
The Forbes 400 has grown over time with the price of admission steadily increasing alongside the total combined wealth. In 1982, a wealthy individual needed $75 million to enter the Forbes 400 list. The minimum wealth necessary in 2018: $2.1 billion. As a result, 204 U.S. billionaires did not make it onto the list. The 1982 price of admission amounted, in today’s dollars, to $200 million, less than a tenth of the wealth of today’s poorest Forbes 400 members.
In 1982, the combined wealth of the Forbes 400 totaled $92 billion, or about $242 billion in today’s dollars. That’s less than the combined wealth of just the top three wealthiest people on the Forbes list today. The combined wealth of the entire top 400 today adds up to $2.89 trillion, more than the GDP of Great Britain, the fifth-largest economy in the world. Half of this wealth comes from 45 individuals. The average wealth on the 2018 Forbes list is $7.2 billion, up 7.5 percent from 2017.
Three individuals—Jeff Bezos, Bill Gates, and Warren Buffett—still own more wealth the bottom half of the country combined, a fact we noted in our 2017 report, Billionaire Bonanza 2017: The Forbes 400 and the Rest of Us. Of these three, Jeff Bezos saw his wealth skyrocket the most, by $78.5 billion to $160 billion. That’s nearly 2 million times median U.S. family wealth.
The wealth of the rest of the country has not kept pace with the billionaire class. Median household wealth remains stagnant at about $80,000. The proportion of households with zero or negative wealth is nearly one in five, about 19 percent. These families living without wealth survive without any buffer from economic calamity. Four in ten families could not come up with $400 if they needed it in an emergency, according to a recent study from the Federal Reserve.
While a number of solutions are required to reverse the gross wealth inequality outlined in this report, this report highlights two bold and innovative proposals to directly address the problem of dynastic wealth.
- Wealth tax: A direct tax on wealth paid by the wealthiest one tenth of one percent could generate significant revenue to be reinvested in creating and restoring opportunities for low wealth households to prosper. A 1 percent annual tax on the wealthiest 0.1 percent of households, those with wealth over $20 million, would generate an estimated $1.899 trillion in revenue over the next decade.
- Inheritance tax: The federal estate tax has been significantly weakened, most recently through the 2017 Trump-Republican tax cut. Taxing inherited wealth as income would help break up current and future wealth dynasties.
In order to successfully implement these policies, the U.S. must take leadership in advancing rules and global treaties that discourage aggressive wealth hiding and tax avoidance.
Gary Reber Comments:
What we need to do is zero in on why the rich are rich and why dynasties exist: the answer is they OWN productive capital assets and thus a property right to control and benefit from the income produced by their property.
Obviously, the reason the so-called 99 percent of the American population are not rich is because they are propertyless in terms of owning wealth-creating, income-producing capital assets.
What are the solutions?
One course recommended by Inequality.org only addresses how to take from those who OWN using a wealth tax to redistribute the earnings from the wealthy capital asset ownership class. This may be considered an emergency measure but a wealth tax does nothing to prevent further ownership concentration or create new productive capital asset owners by growing the economic pie and broadening capital ownership.
Another course recommended in the article is to stick the wealthy with an inheritance tax. Once again this does nothing to prevent their heirs from inheriting the ownership property rights of deceased family members.
A far better comprehensive approach is multi-faceted as follows:
• Eliminate all tax loopholes and subsidies.
• Provide a tax exemption of $100,000 for a family of four to meet their ordinary living needs.
• Encourage through incentives or require corporations to pay out all their profits as taxable personal incomes to avoid paying strong corporate income taxes and to finance their growth by issuing new full-voting, full-dividend payout shares for broad-based citizen ownership.
• Eliminate the payroll tax on workers and their employers, but
·• Pay out of general revenues for all promises for Social Security, Medicare, government pensions, health, education, rent and subsistence vouchers for the poor until their new jobs and ownership accumulations provide new incomes to substitute for the taxpayer dollars to fill these needs.
• Establish a single tax rate for all incomes from all sources above the personal exemption levels so that the budget could be balanced automatically and even allow the government to pay off the growing unsustainable long-term national debt. The poor would pay the first dollar over their exemption levels as would the hedge fund operator and others now earning billions of dollars from capital gains, dividends, rents and other property incomes which under some tax proposals would be exempted from any taxes.
• At death, individuals should be discouraged from passing on their wealthy estates solely to their heirs. As a substitute for inheritance and gift taxes, impose a transfer tax on the recipients whose holdings exceed $1 million in value, thus encouraging the super-rich to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.
• The Federal Reserve would stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and
• Begin creating an asset-backed currency that could enable EVERY child, woman, and man to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.
• The CHAs would process annually an equal allocation of productive credit to every citizen to specifically and exclusively purchase full-earnings, full-dividend payout shares in qualified corporations, both established and start-ups, needing funds for growing the economy through viable self-liquidating capital formation projects and private sector jobs for local, national and global markets.
• The shares would be purchased using interest-free capital credit wholly backed by projected “future savings” (earnings) in the form of new productive capital assets as well as the future marketable goods, products and services produced by the added technology, renewable and “green” energy systems, manufactories, rentable space for entrepreneurial endeavor and infrastructure, both repaired and new, added to the economy.
• Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, which employs the concept of “risk pooling” to spread financial risks evenly among the entire citizenry, but
• Would not require citizens to reduce their funds for consumption (savings) to purchase shares, nor would there be any other requirement other than being a citizen.
The end result would be that citizens would become empowered as owners to their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well being on the State and whatever elites control the coercive powers of government, using job dependency, the police, courts of law, prisons, the tax system and so on as their means to control.
We need to innovate in such ways that we lower the barriers to equal economic opportunity to become productive capital asset owners simultaneously with the growth of the economy and create a level playing field based on anti-monopoly and anti-greed fairness and balance between production and consumption. In so doing, EVERY citizen can begin to accumulate a viable wealth-creating, income-producing capital estate without having to take away from those who now own, using the tax system to redistribute their earnings. What the “haves” do lose is their capital ownership monopoly, which they enjoy under the present unjust system they have created. A key descriptor of such innovation is to find the ways in which “have nots” can become “haves” without taking from the “haves.” Thus, the reform of the “system,” as binary economist and author Louis O. Kelso postulated, “must be structured so that eventually all citizens produce an expanding proportion of their income through their privately owned productive capital and simultaneously generate enough purchasing power to consume the economy’s output.”
For an in-depth overview of solutions, see my article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.
