Unless our leaders change course, America's wealth concentration has no limit.
By
You have
to consult Dictionary.com for the definition of “trillionaire.”
Webster’s
doesn’t yet recognize trillionaire as a word. But it will. If you’re under 60,
America’s first trillionaire will likely appear in your lifetime.
And the
recent budget deal in Congress does nothing to alter that scenario.
In 1982,
Forbes magazine published its first survey of the 400 wealthiest Americans. The
wealthiest American at that time, Daniel Ludwig, held a reported net worth of
$2 billion. Bill Gates topped the 2013 Forbes 400
listat $72 billion. That’s a 36-fold increase in America’s largest
fortune over 31 years.
As
Forbes acknowledges, its survey tends to undercount wealth. Last year, a Tax
Justice Network analysis put the unreported global wealth stashed in offshore
tax havens at $21 trillion.
The
super-rich are setting new records, $10 billion, $50 billion, and soon enough
$100 billion. Rather than objecting, our nation celebrates the increasingly
obscene fortunes of the super-rich as we do athletes breaking sports records.
Reaching
$1 trillion will be what hitting 73 home runs was before we knew Barry Bonds
cheated to get there.
Will our
first trillion-dollar fortune also be tainted by misdeeds of the achiever?
Could that be what finally wakes us from our slumber?
A fortune
worth $1 trillion — $1,000,000,000,000 — would today be enough to buy every
square foot of real estate in Manhattan. A trillionaire could take everyone on
the planet out for a $100 steak dinner, if we had a restaurant that could hold
7 billion people. A $1 trillion fortune would equal the wealth of a million
millionaires.
What’s
fueling this astonishing concentration of wealth? Tax policy. In Bill Clinton’s
words, it’s just arithmetic.
All
individuals face four principal constraints on the wealth they can accumulate:
living expenses, the taxes they must pay on income from labor, the taxes they
must pay on income from capital, and inheritance taxes. The roles those
constraints play change as people move up the wealth scale.
At the
bottom, living expenses and taxes on income from labor greatly impede the
accumulation of wealth. But for the super rich, living expenses and taxes on
income from labor have a negligible constraining effect, because these rich are
pulling in income, mostly from capital, that dwarfs their living expenses.
Taxes on
income from capital and inheritance taxes, in the end, stand as the only
meaningful constraints on wealth accumulation by the super rich. But these
taxes have decreased over recent decades. Policy makers have, in effect, lifted
the lid on wealth accumulation by those who already have significant wealth,
while holding firmly in place the lid on wealth accumulation for those who
don’t.
And
things are getting worse. States are engaging in a destructive “race to the
bottom,” competing to see who can give the wealthy the best deal at tax time.
At the federal level, an underfunded IRS cannot keep up with tax lawyers and
accountants developing ever more sophisticated tax-saving schemes.
The
unavoidable result: Wealth at the top is growing faster than everyone else’s
wealth. That’s where the arithmetic comes in to play. If the wealth of one
group grows at a faster rate than the nation’s total wealth, that group’s piece
of the pie will increase. That’s a mathematical certainty.
And
unless our leaders change course, America’s wealth concentration has no limit.
Bob Lord, a veteran tax lawyer and former congressional
candidate, practices and blogs in Phoenix, Arizona. He is also an Institute for
Policy Studies associate
fellow. Distributed via OtherWords (OtherWords.org)
