Dear Commons Community,
Robert Reich, Secretary of Labor in the Clinton administration and now the Chancellor’s Professor of Pubic Policy at the University of California, Berkley, has a blog posting reviewing the tax policies during the Ronald Reagan and George W. Bush presidencies that have resulted in “the largest inter-generational wealth transfer in history”. Here is an excerpt:
“The wealth is coming from those who over the last three decades earned huge amounts on Wall Street, in corporate boardrooms, or as high-tech entrepreneurs.
It’s going to their children, who did nothing except be born into the right family.
The “self-made” man or woman, the symbol of American meritocracy, is disappearing. Six of today’s ten wealthiest Americans are heirs to prominent fortunes. Just six Walmart heirs have more wealth than the bottom 42 percent of Americans combined (up from 30 percent in 2007).
The U.S. Trust bank just released a poll of Americans with more than $3 million of investable assets.
Nearly three-quarters of those over age 69, and 61 percent of boomers (between the ages of 50 and 68), were the first in their generation to accumulate significant wealth.
But the bank found inherited wealth far more common among rich millennials under age 35.
This is the dynastic form of wealth French economist Thomas Piketty warns about. It’s been the major source of wealth in Europe for centuries. It’s about to become the major source in America – unless, that is, we do something about it.”
I am presently reading Piketty’s book and Reich is correct in his assertions and sounding the alarm. Echoing Piketty, Reich recommends:
“First, restore the estate tax in full.
Second, eliminate the “stepped-up-basis on death” rule. This obscure tax provision allows heirs to avoid paying capital gains taxes on the increased value of assets accumulated during the life of the deceased. Such untaxed gains account for more than half of the value of estates worth more than $100 million, according to the Center on Budget and Policy Priorities.
Third, institute a wealth tax. We already have an annual wealth tax on homes, the major asset of the middle class. It’s called the property tax. Why not a small annual tax on the value of stocks and bonds, the major assets of the wealthy?
We don’t have to sit by and watch our meritocracy be replaced by a permanent aristocracy, and our democracy be undermined by dynastic wealth. We can and must take action — before it’s too late.”