Oh, to be a billionaire in 2023 – but particularly one born with a silver spoon in their mouth.
You’ve heard the Patriotic Millionaires talk about how billionaires took advantage of the COVID-19 pandemic to dramatically enrich themselves while workers got slammed. To sum it up quickly, the global billionaire class increased their collective wealth by a whopping $2.6 trillion between 2020 and 2022. But what has come as a recent surprise is the fact that this billionaire wealth bonanza has only escalated as the pandemic ebbed and global supply chains untangled: the world’s 2,544 billionaires now hold $12 trillion in total wealth, with America’s 741 billionaires laying claim to $5.2 trillion of it.
We’ve beaten the billionaires-are-getting-
Last week, UBS, a Swiss investment bank that is a favorite of the global rich, released its annual Billionaire Ambitions Report. For the first time, the report found that more people became billionaires last year through inheritance than through entrepreneurship. Specifically, of the 137 billionaires that were minted between April 2022 and April 2023, 53 inherited a total of $150.8 billion, which exceeds the $140.7 billion created by 84 so-called “self-made” billionaires. The report concludes by emphasizing that this great wealth transfer is not a fluke: as more billionaires age – the average billionaire is 69 years old – they are expected to pass on an estimated $5.2 trillion to their heirs over the next 20 to 30 years. This finding tracks with previous research which found that older Americans will pass on $72.6 trillion to heirs over the next 25 years, with a whopping $30 trillion going to just the top 1.5% of households.
One of our board members, Chuck Collins, recently spoke with VICE about the dangers that underlie this great wealth transfer. As an heir to the Oscar Mayer fortune, Chuck knows better than most that large fortunes threaten to turn societies into would-be aristocracies. American history witnessed this during the Gilded Age when robber barons like Andrew Carnegie and John D. Rockefeller reigned supreme, wielding extraordinary levels of power and influence not only in our economy but also in politics and government. The dangers of billionaire oligarchs influencing our politics are serious enough, but it’s even more unsettling when this influence is exerted by billionaires who have never known a life outside of unbridled power and privilege. Just look at the damage that Donald Trump – a man who received no less than $413 million from his father’s real estate empire – has wreaked on our country.
The estate tax was first enacted in 1916 with the aim of checking these sorts of wealth dynasties. Throughout much of the mid-20th century, the tax was fairly successful in this regard as it had a progressive rate structure and relatively low filing threshold. Today, however, the estate tax has become so weak and watered down that it has essentially become an optional tax for rich families, who pay armies of accountants to find every loophole imaginable to lower their tax burden. According to The New York Times, ultra-wealthy Americans will only pay about $4.2 trillion in taxes on the $30 trillion they will pass down by 2045.
It is also important to bear in mind that, despite what the UBS report would have you believe, there is no such thing as a “self-made” billionaire. According to one estimate, 99% of the income of the top 1% can be attributed to – you guessed it – other people’s labor. All of the billionaires that consistently dominate the ranks of the Forbes list didn’t get there all on their own. Jeff Bezos started Amazon with $250,000 in seed money from his parents. Bill Gates’ mom convinced the Chair of IBM to invest in her son’s company. While they may not be the sons of bona fide billionaires, it’s myopic to believe that they could have gotten where they are now were it not for their families’ wealth and connections.
Mark Cuban, one of the billionaire investor hosts of ABC’s “Shark Tank,” summed this idea up pretty well in a recent interview with WIRED: “The reality is, in order to become a billionaire, the one thing you have to have is luck. Any billionaire who tells you they could just do it again, no. You have to be lucky.” He then followed by saying, “One of the most patriotic things that you can do when you’re wealthy is pay your ************* taxes.” We obviously couldn’t agree more – and would love to have Mark join our ranks!
It’s sometimes difficult to fully appreciate just how much money a billion dollars truly is. To make $1 billion, the median full-time American worker would need to work 17,201 years – or longer than recorded human history. There is no justifiable reason for one human being to have 17,201 years’ worth of money while workers struggle to provide for their families. It is natural for people to want to leave their children and grandchildren with some financial help, and you won’t hear many Patriotic Millionaires quibble with this idea. But there comes a point when silver spoons become so large that they can be used as a cudgel against democratic institutions.
The first and most essential step that lawmakers must take to curb the threat of dynastic billionaire wealth is to reform the tax code. We need to restructure the estate tax so that it is no longer an optional tax for heirs to pay. Sen. Sanders’ For the 99.5 Percent Act would go a long way in this respect by re-instituting a progressive rate structure to the tax, lowering its threshold, and closing its most egregious loopholes. We also need to swiftly enact measures like Reps. Cohen and Beyer’s Billionaire Minimum Income Tax or Sen. Wyden’s Billionaires Income Tax, both of which would ensure that billionaires start paying regular taxes on all of their income like everyone else in the country. This would be an important move to prevent billionaires’ wealth from spiraling into generational power transfers.
At some point, extreme wealth becomes extreme power. And when power is inherited, rather than derived from the citizens and workers of a nation, it is fundamentally anti-democratic. To prevent a new aristocratic class from dominating our politics, we must ensure billionaires and their estates are thoroughly, fairly, and effectively taxed.