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Robert B. Reich: The rise of the non-working rich


In fact, we're on the cusp of the largest intergenerational wealth transfer in history.

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 10 wealthiest Americans are heirs to prominent fortunes. The six Walmart heirs have more wealth than the bottom 42 percent of Americans combined (up from 30 percent in 2007).




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.

As income from work has become more concentrated in America, the super-rich have invested in businesses, real estate, art and other assets. The income from these assets is now concentrating even faster than income from work.



But Republicans have been even more ardent than Democrats.

For example, family trusts used to be limited to about 90 years. Legal changes implemented under Ronald Reagan extended them in perpetuity. So-called "dynasty trusts" now allow super-rich families to pass on to their heirs money and property largely free from taxes, and to do so for generations.

George W. Bush's biggest tax breaks helped high earners, but they provided even more help to people living off accumulated wealth. While the top tax rate on income from work dropped from 39.6 percent to 35 percent, the top rate on dividends went from 39.6 percent (taxed as ordinary income) to 15 percent, and the estate tax was completely eliminated. (Conservatives called it the "death tax" even though it only applied to the richest two-tenths of one percent.)



House Republicans want to go even further than Bush did.

Rep. Paul Ryan's "road map," which continues to be the bible of Republican economic policy, eliminates all taxes on interest, dividends, capital gains and estates.

Yet the specter of an entire generation who do nothing for their money other than speed-dial their wealth-management advisors isn't particularly attractive. It's also dangerous to our democracy, as dynastic wealth inevitably accumulates political influence.


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.



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