The non-working rich

http://robertreich.org/post/91880951615

July 15, 2014

In a new Pew poll, more than three quarters of self-described conservatives believe “poor people have it easy because they can get government benefits without doing anything.”

In reality, most of America’s poor work hard, often in two or more jobs.

The real non-workers are the wealthy who inherit their fortunes. And their ranks are growing.

In fact, we’re on the cusp of the largest inter-generational 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 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).

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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.

In 1979, the richest 1 percent of households accounted for 17 percent of business income. By 2007 they were getting 43 percent. They were also taking in 75 percent of capital gains. Today, with the stock market significantly higher than where it was before the crash, the top is raking even more from their investments.

Both political parties have encouraged this great wealth transfer, as beneficiaries provide a growing share of campaign contributions.

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% to 35 percent, the top rate on dividends went from 39.6% (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.)

Barack Obama rolled back some of these cuts, but many remain.

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