Forbes Magazine recently published its annual list of the 400 wealthiest Americans and invited us to join it in celebrating the extraordinary accomplishments of these supposedly self-made billionaires. But, even the most cursory examination of the list reveals that, while there are individuals who made their huge fortunes through their own entrepreneurship, inventiveness, or whatever it takes these days to accumulate great wealth, it is certainly not the case with all of them. A significant portion clearly got a huge leg up in the race to the top of the financial heap by being lucky enough to be born into an already fabulously rich family. Looking at the top ten alone, half -- David Koch and four of Sam Walton's children -- did nothing notable to earn their place, aside from inheriting their parents' money.
Neither the Kochs nor the Waltons pulled themselves up by their bootstraps or created products or services that changed the lives of millions of people around the world. On the contrary, the Kochs have used their inherited wealth to corrupt the democratic process for their own financial and political gain while the Waltons have engaged in monopolistic practices that have impoverished workers on both the supply and retail sides of their enterprise, while systematically driving smaller competitors out of business. Perusing the rest of the list reveals a similar pattern. Perhaps as many as a third are people of middle class origin but most either built upon or simply chose to live well on their extremely generous inheritances.
In just the past year, the average net worth of each of these individuals increased by $400 million to a record $4.2 billion. The collective wealth of the 400 has increased from $300 billion in 1992 to $1.7 trillion by the latest count, a more than fivefold increase. Meanwhile, the net worth of the middle class has been stagnant and poverty rates have soared. If this does not provide clear evidence that the economy and the tax laws are heavily rigged in favor of the have-mores and want-mores, I don't know what would. This situation is not only grossly unfair but insupportable in the long run. The extreme and unabated concentration of wealth in the hands of the few and the impoverishment of everyone else will bring about the inevitable collapse of the total economic system.
So what should be done? At the very least, the inheritance tax rate should be raised on the billionaires and multimillionaires, as well as eliminating the countless devices they use to avoid whatever rates apply to them, through the creation of trusts, shadow companies, off-shore accounts, and the like. The tax rates on estates, as in the case of taxes on income, should be progressive, with the lowest rates -- the present 15 percent -- applied to inheritances over $10 million, and the highest -- maybe 70 percent -- imposed on multibillion-dollar estates. The actual rates and corresponding levels can vary -- and certainly would, as a result of any congressional action -- but the important point is to put this topic on the table so that it can be part of the national debate about balancing the budget.
It is noteworthy that neither the Democrats nor the Republicans are proposing increases in the estate tax. As always, the latter are putting forth their usual lame arguments for lowering or eliminating it. Most notable among these is the threat that inheritance taxes supposedly pose to the nation's family-owned farms when, in reality, the greatest destroyer of the family farm has been the huge agribusiness monopolies who have benefited enormously from Republican policies. If, by any chance, tax reform of the type I am proposing receives any consideration, there is a danger that much of the public will be hoodwinked into opposing it on the basis that their own resources -- no matter how modest -- will be affected. There will also be legions of commentators and others who will spout the anti-government mantra and argue that we must not overtax the billionaires because they are -- contrary to all evidence -- the creators of jobs.
Another justification advanced for allowing members of the Forbes 400 and people like them to hang onto their billions is that they do good works with their money. That is certainly true for some of them who provide financial support to a variety of philanthropic causes and institutions. Warren Buffett and Bill Gates are the most notable examples of those billionaires who seem to have a well-developed social conscience. The problem is that most of them donate a miniscule portion of their vast fortunes to philanthropy and only to causes and institutions of their own choosing. Their support often comes with the explicit requirement that the recipient -- a university, hospital, theatre, museum, or some such entity -- name a building, clinic, school or scholarship for them or one of their family members. What's wrong with this? Nothing much, if these donations were not tax-deductible and, therefore, diverting tax revenue from the Treasury to subsidize causes and institutions that are probably not a national priority. It makes no sense, especially in a time of fiscal crisis, to forego taxes that can be used for improved public education, renewed national infrastructure, and countless other pressing needs, in order to indulge the individual preferences and personal gratification of the wealthy.
It is essential to the health of the economy and the wellbeing of the country as a whole that this topic be put on the table and actively supported by those who want a more just tax system. There is reason to believe that, with sufficient public education and advocacy, the idea could gain political traction. Based on the results of the recent national campaign in which the president explicitly ran on a platform that promised to raise taxes on the wealthy and subsequent polls that indicate strong support for that plan, it might have more support than one might expect under other circumstances. While the president and the rest of the Democrats have been focusing on income taxes -- which, at least in theory, are earned -- what would make the case for raising inheritance taxes -- which are unearned -- any less compelling?