The New York Times investigation into the Trump family’s financial misdeeds recently revealed what had been obvious to most: The president is no self-made man. Like so many bombshell stories about the president, this story has been largely overlooked as new and more flagrant Trump indignities erupt nearly every day. Yet the tactics that the report shines a light on are hardly peculiar to the Trumps. Many wealthy families use similar tactics to stockpile their wealth and keep it from taxation that could reinvest it to meet the nation’s needs. And in doing so, these families keep building wealth with which they can wield political power.
A new report from the Institute for Policy Studies (IPS) takes a close look at the billionaire multi-generation families who wield that power—the American dynasties. Taking their cue from the Forbes 400 list of the wealthiest people in the United States, the report, "Billionaire Bonanza," by Chuck Collins, director of the Program on Inequality and the Common Good, and Josh Hoxie, director of the Project on Opportunity and Taxation, both at IPS, details how the nation’s 15 wealthiest families—some with household names (Walton, Koch, Mars), some perhaps less-known (Duncan, Bass, Stryker)—are worth a combined $618 billion. Overwhelmingly, this is inherited money; the companies from which these families derive their wealth were all started at least a generation ago.
The report takes 1982—the first year the Reagan tax cuts on the rich took effect, and the year that Reagan’s Security and Exchange Commission legalized stock buybacks—as its point of departure. In that year, a person needed $75 million to qualify for the Forbes 400. A nice pile of money for sure, but today a person needs at least $2.1 billion, meaning that in the past 36 years, the bar for entry has risen by 2,800 percent.
The three richest families—the Waltons, the Kochs, and the Marses—saw their wealth grow by almost 6,000 percent since 1982, when the Forbes 400 was first published. (“I did the math three or four times because I kept thinking I missed a digit somewhere,” Hoxie says. “Rising 6,000 percent?”) Together these three families own $348.7 billion, as much wealth as the four million families whose wealth—roughly $80,000—is at the national median.
Adjusted for inflation, median wealth in 1983 was roughly $84,000. So, while wealth at the top has exploded, the wealth at the bottom and in the middle has stagnated—and the racial wealth gap continues to grow, too.
But it’s not just that the numbers are staggering. It’s what’s being done with all this wealth. While Forbes may have you believe that these billionaires are using their money to drive positive social change (a link on the Forbes 400 homepage allows you to “meet the billionaires building change”), the wealth of these families allows them to both aggressively protect their fortunes and also lobby to influence policy ... often to protect their fortunes.
A common argument against aggressively taxing the rich is that they deserve to keep their fortune because they earned it. Of course, second-, third-, and fourth-generation billionaires owe their fortunes to having won the birth lottery. As well, even these families’ original patriarchs wouldn’t have had capable employees absent the public investment in schools, or been able to move their goods absent the public investment in roads, or been able to protect their property absent the public investment in policing. Nonetheless, Hoxie points out, many rich people then “use their wealth and their economic power to protect themselves and shield themselves from contributing anything for the public good.”
There is an entire industry, the “wealth dynasty protection industry” as Collins calls it, dedicated to guarding massive wealth from taxes. Families hire armies of accountants and tax managers to put wealth into “ownership structures that are fairly complicated and opaque,” Collins says. Investigative reporting can give us “little windows into the picture of how this is done,” he continues—but there remain unknown unknowns. “There are probably other dynastically wealthy families not appearing on the [Forbes 400] list because they’re able to fly below the radar,” says Collins.
The New York Times exposé of the Trump family provided a glimpse into how a wealthy dynasty takes advantage of loopholes in the tax code or outright breaks the law in order to keep as much wealth as possible. The Times account documented their use of the Grantor Retained Annuity Trust (GRAT), which is “a wealth transfer tool that can facilitate and advance a family’s objectives and legacy by providing opportunities for tax free, low-risk transfers of wealth,” according to Hawthorn, PNC Bank’s family wealth-planning arm, which offers “tailored wealth management solutions to ultra-affluent families.”
A great deal of wealth is invisible to tax authorities—and not just because it’s stowed in offshore accounts. “Some 10 percent of the world’s wealth has vanished,” Collins tells the Prospect. “Where is that money? It’s in our midst. Real estate, art—all those assets are owned by trusts and entities that don’t require disclosure, so the wealth is still bouncing around—disrupting our local economies and [enabling the wealthy to inflate] housing markets.”
One way wealthy families have used their influence and millions has been to lobby against the estate tax, funding consultants and elected officials to campaign against it with deceptive messaging (“end the death tax”). That campaign has been notably successful. The GOP tax law doubled the estate tax exemption; wealthy families can now pass on up to $22 million without the estates being taxed. (While inheritances demonstrably reduce the incentive for rich heirs to work, the GOP also pushes forward work requirements in assistance programs as “work incentives.”)
As Naomi Klein wrote in The Intercept last month, it’s imperative to connect the rise of Trump to the wealth-hoarding of these soi-disant modern royals. The president “never would have gotten where he is without the ideological scaffolding carefully put in place by other scions and dynastic families,” she wrote. Through their backing of right-wing think tanks, campaigns, and candidates, the Koch brothers, John M. Olin, Richard Mellon Scaife, and the DeVos family have “moved the Republican party so far to the right that Trump could stomp in and grab it,” wrote Klein.
The corollary, of course, to the wealth hoarding at the top is that those at the bottom never see it—and those in the middle, only rarely. There are numerous ways we could shave away some of this exorbitant wealth and enlist it in the public good. The IPS report focuses on two redistributive taxes that could have significant effects—taxing inheritances and implementing a flat tax on wealth.
Instead of an estate tax that levies the estates of wealthy persons after they die, a progressive Congress could choose to instead tax the inheritance itself. Such a tax would alter the federal income tax to include heirs’ inheritances as taxable income, and add a surcharge no higher than the maximum payroll tax rate. Even including an exemption of $1.25 million, an inheritance tax could generate $670 billion in revenue over ten years, according to New York University Law Professor Lily Batchelder, who has written extensively on this issue and designed the framework for the tax.
But a yearly assessment on great wealth could make even more of a difference. A 1 percent flat tax on just the top 0.1 percent—on the assets of those worth more than $20 million—would result in $1.899 trillion in revenue in a single decade. That’s an amount that could yield significant investments in debt-free college, affordable housing, health care—and the list goes on.
With great fortunes now emerging in the largely monopolized tech economy, such policies become increasingly important. Jeff Bezos is now the world’s richest man, but he has not yet passed on his riches to the little Bezoses. There’s still time to ensure that a sizable share of his almost unfathomable wealth—impossible to have amassed had the Defense Department not funded the development of the internet many decades ago—is directed to public purposes and public needs through better tax policy—before a Bezos dynasty is formed.
“We’re not a society trying to create kings and queens and piles of hereditary fortunes,” says Collins, “but that’s essentially where we’re heading if we don’t intervene to break up these wealth dynasties. And if you think we’re already there,” he adds, the future “will be worse.”
Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.