From the New York Times comes yet more evidence of the growing concentration of wealth in America, this time from an analysis of inheritances.
A lot of money is being inherited these days - $200 billion a year, in fact, more than three times the amount that was passed down 30 years ago even after adjusting for inflation.
But who's getting it? In 2004, the median inheritance was $29,000 - down $10,000 from 30 years ago when adjusted for inflation. So most people are seeing less money, not more. The answer is that most of the money goes to the very rich: 7 percent of the estates account for half of it.
There are several reasons for shrinking inheritances, starting with basic demographic changes: parents are living longer and spending more of their money themselves, and most people do a lousy job of saving for retirement at a time when fewer and fewer people can rely on pensions and other traditional sources of retirement income. So what money they do save gets spent.
But simple demographics cannot explain the increasing concentration of wealth reflected in the statistic that 7 percent of estates account for half of the money being passed down.
The story notes that wealthy heirs are seeing more and more money:
"We are seeing bigger-sized estates," said Myra Salzer, president of the Wealth Conservancy in Boulder, Colo., which helps heirs manage their inherited wealth.
"Wealth is just exploding," said Daniel FitzPatrick, chief executive of Citigroup Trust, whose clients typically have hundreds of millions of dollars.
Add this to all the other evidence of wealth concentration in America, and other measures of disparity such as CEO pay, which now averages 500 times the wages of average workers. Fifteen years ago the ratio was 140 to 1; 40 years ago it was 40 to 1.
I don't believe in "punishing the rich" simply for being rich. I'd like to be rich someday, after all. But I do think that it's fair to tax someone's second $300,000 at a higher rate than everyone's first $300,000. And I think we all have an interest in the ill effects of excessive wealth concentration.
Article comments
— go to most recent comments1 - Nancy
The best points the very wealthy (like Bush, Congress, & co.) might like to consider: that too few too wealthy = class warfare = social unrest = revolution & downfall of the extremely wealthy.
2 - Dave Nalle
The reason for getting rid of the estate tax is very, very simple. That money, more than any other source of wealth in the US goes directly into investment. That investment bolsters the economy more directly than any other form of spending. Consumer spending is great, but it doesn't benefit the spender nearly as much as investment does, because investing brings returns for the investor, provides capital for the company, and that filters down to the employees. If your goal is a strong economy getting rid of estate and capital gains taxes will do more to stimulate the economy than any other kind of tax cuts.
Dave
3 - Dave Nalle
Ah, and I forgot to cover the wealth gap. The fact that the rich are getting richer does NOT mean that the poor are getting poorer. Wealth is not a zero-sum system where one group can only gain at the expense of another. The fact is that both the poor and the wealthy are gaining in wealth, but because the rich have more to start with they advance more dramatically. But the key thing is that everyone is better off.
Dave
4 - gonzo marx
as to comment #2 ...bullshit
can we say Paris Hilton?
spare me the canned rhetoric, these whelps didn't earn shit
say we cap it at $5million...every dime after that gets taxed at a nice high rate
can you honestly state that these trust fund babies have done any good or have any need of more than that much?
just a Thought
Excelsior!
5 - Sean Aqui
Perhaps. But there are plenty of historic examples where excessive concentration of wealth did not lead to any of that: it led to a caste system.
In a global economy, is there any guarantee that that wealth will be invested domestically? Not when you can chase higher returns abroad. So the interests of the wealthy and the interests of society do not necessarily align.
But mostly, if we're going to blow a hole in the budget in pursuit of tax reform, then we should fix AMT before we fix the estate tax.
And I'd like to hear an answer to my basic question: what makes the estate tax different from all other wealth transfers that are taxed?
6 - Dave Nalle
Gonzo, I guarantee you that Paris Hilton has a staff of employees who depend on her and that she has an investment advisor who handles her money and makes sure it's spent well. She's a walking wealth generator for everyone around her and who she comes into contact with. We should give her MORE money and she'd save the economy single handedly.
Sean, if the global economy benefits the US economy also benefits, and despite the fact that investment IS a global market, most US citizens invest 80% of their wealth in companies operating primarily in the US.
And I thought they WERE fixing the AMT. I agree on that one. It hits middle-class taxpayers way too hard.
As for what makes the estate tax different, it's just more likely to be invested money than day to day income is. That's the main difference.
Dave
7 - gonzo marx
another case of "trickle down" bullshit...
in other words, the wealthy piss on the rest of us and tell us it's a good thing
i ain't buying it
Paris may be generating a lot of cash for her dog's manicurist, or clothes designers...but not much else...and she didn't earn a dime of it
think about it a second...the $100,000 she pays for her personal manicurist could translate into 4 full scholarships for folks who can't afford it to go to college and generate real capital earnings
a far more worthy use, and just one silly example
but time has shown that those who love their "supply side economics" are either delusional, or the recipients of the spoils of said system
they are the same ones who conveniently forget the Equation must Balance "supply and demand"
they are the same ones that like ilegal immigrants working off the books so they can get cheap labor
they are the same ones that like offshoring american jobs (including things like essential parts for fighter jets made in China) rather than pay a decent wage to American workers
on and on
but you get the Idea
"Know your Enemy"
Excelsior!
8 - Sean Aqui
Sean, if the global economy benefits the US economy also benefits, and despite the fact that investment IS a global market, most US citizens invest 80% of their wealth in companies operating primarily in the US.
It'd be interesting to run the numbers and see what returns the most money to the U.S. economy: taxing an inheritance dollar, investing that dollar in the U.S., or investing that dollar abroad.
I'd be willing to believe that the answer is 2,1,3, with 2 and 1 being pretty close and 3 a distant third. Because only a portion of the growth generated by the foreign-invested dollar redounds to the U.S., and we'd have to balance that against the damage done by increased competition from foreign businesses, and from factories built there instead of here.
And I thought they WERE fixing the AMT. I agree on that one. It hits middle-class taxpayers way too hard.
They're dragging their feet, despite it being the #1 issue for most taxpayer groups. Why? Because the cost would be enormous. Funny how the estate tax, which isn't #1 on the list because it affects so few people, got fixed first despite its also-significant cost.
As for what makes the estate tax different, it's just more likely to be invested money than day to day income is. That's the main difference.
Fair enough. That just doesn't strike me as a significant enough difference to justify making it entirely tax-free, especially because the budget shortfall will have to be made up by others. A substantial shift of the tax burden from the wealthy to the less wealthy is rarely a good idea. Excessively taxing the rich is a bad idea, too, but that's not really what we're talking about here.
9 - gonzo marx
you want to fix the Budget?
simplicity itself...sales tax on stock trades
now watch the elitist pigs panties get all twisted into a wad...
my Question is why not?..the stock market is nothing more than legalized gambling...and we DO tax every other form of gambling...so why not this?
discuss...
Excelsior!
10 - Sean Aqui
If the tax weren't too high, I wouldn't have a problem with that.
But is there any particular reason we should want to raise the transaction costs of trading? That's just one more way to keep the stock market a rich person's playground, and reduce investment returns all around.
The emergence of 401(k)s and low-fee trading sites lie e-trade have helped democratize the markets; you no longer need $1 million to play. Isn't that a good thing?
11 - RedTard
I completely agree with raising the estate tax. Taking taxes from people when they are dead is certainly the most humane way to do it. There is a lot of angry rhetoric among those who stand to benefit from a large inheritance, but I haven't seen anything that even approximates a logical argument for random genetic luck gaining a person access to billions.
We once had a system where wealth and power was passed by birthright. I think the people rose up and cut off the heads of the Paris Hilton's at that time. I hope we are not driven to that extreme again.
12 - Sister Ray
So people shouldn't be allowed to pass their money on to their children?
Paris Hilton isn't hurting anyone by having all that money. Her parents or grandparents gave it to her fair and square.
13 - RedTard
"So people shouldn't be allowed to pass their money on to their children?"
No, systems based on birthright have been seen as unfair for centuries. That same false logic is exactly what Kings and royalty were saying years ago and it's just as wrong now as it was then.
14 - RedTard
Also, cutting Paris's fortune down to $5 million is not exactly gonna put her out on the street. Her parents' money will still ensure that she never has to perform any lowly serf labor at any time during her life.
15 - Jon Sobel
Tax the churches. Won't somebody please tax the churches?
16 - Dave Nalle
Yes indeed, Gonzo. Let's tax stock trades - taxing income a second and possibly a THIRD time. Let's shut down the economy, get ourselves cardboard boxes and curl up in a fetal position. Good lord that's a dumb idea.
Resentment and envy are NOT a good basis for a sound economic policy.
I'm with Jon Sobel. Let's start by taxing the damned churches.
Dave
17 - Sister Ray
There's a difference between ruling a country by birthright and leaving money to your heirs. I think people, rich or poor, should be able to leave their estate as they choose.
If the Hilton family had run some mom-and-pop small business and passed on the proceedings to their heirs, no one would begrudge them. The fact that they made more money than average shouldn't make it right to take it from them.
18 - Al Barger
Love ya Gonzo, but beyond the fact that your resentment-based prescriptions for wealth confiscation would be highly detrimental to society in general (as Brother Nalle has explained very succintly), they are also highly presumptuous on your part. By what right do you presume to steal other people's money like this?
Thieving is bad enough when poor folks do a little to get by, but it's beyond excusable and into plain, flat-out wickedness to push it as social policy just to satisfy your hatred of rich folk.
19 - gonzo marx
lol..both of you mistake my Concept for "hatred"
i would have to give a flying fornication bisecting a rotating pastry about any of them to generate a powerful emotion like hate
rather what i am doing is throwing out some ideas on how to enable the System to work a bit better and enable a more even playing field for Americans....ALL Americans
if you think a cap of 5 mill to each heir is too small, well then there isn't much to discuss...it woudl protect small family owned businesses while taxing (note i did not mention at what rate) large quantities of wealth to be used , if for no other purpose, than to pay off the Deficit
same with stack trades....it IS legalized gambling, we are all for any other kind of "sin tax"...the rate can be negotiated, and by doing so..the capital gains tax can be removed from trading and replaced by this flat and fair system....again, the proceeds used solely to pay down the National Debt
you have a better Idea?
Excelsior!
20 - Maurice
gonzo - you are fun.
The Stock Market could be described as gambling and is certainly emotion based but it serves another purpose. It is real money used for capital. When one company buys another (with stock) there is real value there and helps both companies. The economy would be hurt by such a tax.
As far as wealth. I think it is difficult for anyone to maintain wealth for very long. The Hilton example is perfect. What is Paris doing to grow the empire? She is spending more of her wealth not growing it. The Hilton hotels may continue to grow but it will have nothing to do with Paris's efforts.
Through adversity we grow strong. The wealthy kids have no adversity so they fade away.
21 - Mr. Real Estate
The estate tax hurts middle class inheritors more than anyone else. The rich know the methods to protect their wealth (i.e., trusts, etc.), while most poor and middle class folks do not.
Quite frankly, I love the rich. If it were not for their business, I would not be middle class, myself.
Dave is right. The returns from the invested money do nurture the middle class and the poor, who in some way, shape or form, benefit from it.
May god Bless the wealthy and may their returns grow greatly, as the larger their wealth becomes, so do the number of benefits grow to everyone else. Employment, for example, is at an all time high at the same time wealth has grown at all time high levels, and business is also booming at high levels. This is not a coincidence. It is the trickle down effect of wealth.
-John Mudd
"Mr. Real Estate"
22 - JP
The estate tax affects the richest 1%. Repealing it will further put the tax burden on the working class and wage earners. No need to repeal it.
23 - Assmuncher says "what?"
Mr. Real Estate, how brainwashed are you? You might not be so thankful when your job is outsourced so the rich man can get richer. Then you will get to see all these great jobs that have been created.
If you are going to tax me, please do it after i'm dead. I won't need it quite as much. The wealthy should be the first ones to give back to a country that gave them the opportunity to become wealthy.
24 - Assmuncher says "What?"
Trickle down effect definition:
When a rich man blows his wad on your forehead, it trickles down into your eyes and blinds you so he fuck over the middle class.
25 - Maurice
Once again I wish for a "Commenter Off" button.