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Supreme Court Justice Louis Brandeis warned in 1941, “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”
This year’s stock market saw high returns for month after month, as retirees and stock runners alike saw their portfolios rise. Then one day this fall, the market took a turn, and all of the increases of the past several months vanished.
That’s how it goes for the market. Sometimes you’re up, sometimes you’re down.
For the three wealthiest families in the country, however, the market only ever shoots skyward. The Waltons of Wal-Mart, the Kochs of Koch Industries, and the Mars of Mars chocolate own a combined $348.7 billion. Since 1982, their wealth has skyrocketed nearly 6,000 percent.
None of the living members of these families founded the companies from which their fortunes come — all were started by earlier generations.
In fact, more than a third of the Forbes 400 inherited the businesses that generated their wealth. These modern wealth dynasties exercise significant economic power in our current gilded age of extreme inequality.
A new report I co-authored with my colleague Chuck Collins at the Institute for Policy Studies, Billionaire Bonanza 2018, looks at the rise of these wealth dynasties. The Forbes 400 combined own $2.89 trillion, we found. That’s more than the combined wealth of the bottom 64 percent of the United States.
The median family in the United States owns just over $80,000 in household wealth. The richest person in the United States (and the world), Jeff Bezos, has accumulated a fortune nearly 2 million times that amount.
These pictures paint a grim picture of wealth inequality in the United States in 2018.
Wealth is concentrating into fewer and fewer hands while the rest of the country struggles to get by. One in five families has zero or negative wealth. Two in five Americans couldn’t come up with $400 if they needed it in an emergency.
Previous generations tried to warn us about economic inequality. Former President Teddy Roosevelt said in 1913, “Of all forms of tyranny, the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy.”
A generation later, Supreme Court Justice Louis Brandeis warned in 1941, “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”
And for a time, we heeded these warnings. Wealth and income inequality peaked in the 1920s before the passage of high personal income tax rates on the rich, a federal estate tax, and other inequality-fighting public policy measures took hold. Americans enjoyed a general flattening of the economic pyramid up until the 1980s when the modern period of tax cuts for the rich and austerity for the rest of us begun.
It’s safe to say that a country in which three individuals own more wealth than half the country — as Jeff Bezos, Bill Gates, and Warren Buffett do now — is not what Brandeis or Roosevelt hoped for the direction of the country.
Without action, French economist Thomas Piketty warns, the United States will devolve into a “patrimonial capitalism” where the heirs of today’s billionaires dominate our politics, culture, and economy.
The good news is we have solutions to avoid this.
A smart step forward would be instituting a federal wealth tax on assets above $20 million, which would raise an estimated $1.9 trillion over 10 years that could be invested in generating economic opportunities for low-wealth families. Another good idea is to tax large inheritances — people’s genetic lottery winnings — as ordinary income.
There’s nothing natural or inevitable about wealth dynasties. Our ancestors recognized this and took action. We can too.
Josh Hoxie directs the Project on Taxation and Opportunity at the Institute for Policy Studies
First published in OtherWords. Included in Vox Populi with permission.