How we can prevent the wealthiest of our wealthy from exempting virtually unlimited billions from tax.
Five powerful families? Is this about the mafia? No, for these five families, it’s not la cosa nostra, “the thing of ours.” Rather, it’s la cupidigia nostra, “the greed of ours.”
And it’s their greed that’s killing our democracy.
Six hundred billion dollars approximately equals the budget for the United States Department of Defense for an entire year — enough to pay, feed, and house over 1,000,000 active duty service personnel and 800,000 reservists, operate close to 1,000 military bases, pay 750,000 civilian personnel, and fund all military equipment purchases.
That $600 billion also equals the combined wealth now hoarded by just five American families — specifically, the Walton, Bezos, Koch, Gates, and Mars clans. The Walton family alone has a combined net worth estimated at $150 billion. The poorest of the five families, the heirs of the Mars candy fortune, hold about $90 billion.
What happens when we let just five families in a society of over 325 million hoard that much wealth? Society suffers.
Consider the outsized power that our current intense level of concentrated wealth gives to people never chosen by voters to lead. The average congressional campaign now costs just over $10 million. Sounds pricey, right? For one of our five colossally rich families, the cost of funding a congressional campaign comes to less than two days worth of earnings on the family fortune.
Wealth doesn’t just translate into power through political channels. The wealthy can wield power through philanthropy as well. Consider the Gates Foundation.
On the surface, the work of the Gates Foundation appears to reflect the simple generosity of its founders, Bill and Melinda Gates. But philanthropy reflects much more than generosity. The Gates Foundation investments in education have relentlessly pushed policies that sizeable numbers of parents and teachers oppose.
America’s super rich, notes Joanne Barkan, a leading analyst of “charitable plutocracy,” don’t particularly care that their ideas “may not be based on sound research or principles.”
These rich “know what they want,” Barkan adds, and they want to see what they want happen — and quickly. But the give-and-take of democracy can be slow, and “that turns out to be a great nuisance for plutocrats.” So they spend and spend until they get their way.
Jeff Bezos, whose net worth now exceeds $140 billion, recently purchased one of the nation’s leading newspapers, the Washington Post, at a price equal to less than 1 percent of his net worth. So far, Bezos has not exercised undue influence over the Post’s reporting, but that could change. Other American billionaires who control giant media enterprises have not operated so benignly.
An even more pernicious reality: Grand concentrations of private wealth directly translate into new laws of the land. The lobbyists the rich hire have left us with a vicious cycle: Wealth begets legislation that begets more wealth for the wealthy.
One example: The Mars and Walton families have played a leading role in lobbying for the elimination of the federal estate tax. Their efforts have yielded a federal estate tax law so toothless that billionaires can entirely escape estate tax through careful planning. And, at the state level, the estate tax no longer exists in 32 jurisdictions.
The five wealthiest American families do not, of course, stand alone in our plutocracy. Bloomberg researchers recently identified the world’s 25 largest family fortunes. Ten of these 25 families call the USA home. Among them: the Cargill family ($42 billion), the Cox family ($33 billion), and the S.C. Johnson family ($26 billion). All these family giants originated with businesses launched in the 19th century.
But the Bloomberg list understates the vastness of American wealth hoarding. Bloomberg excludes from its list of the 25 largest global family fortunes all first-generation wealth (think Bezos), wealth in the hands of a single heir, and familial wealth too diffuse to value, like the fortune of the Rockefeller family.
Why have the fortunes of wealth-hoarding American families been accelerating so rapidly over recent decades? We’ve acquiesced to a tax system that taxes income from wealth far less heavily than income from labor and then lets that wealth compound across generations.
Societies that allow wealth to be hoarded do themselves great damage. That hoarded wealth can’t be used for the collective good. And that hoarded wealth, even more insidiously, confers power on those who hold it, people who have not in any way been democratically elected.
Nearly one century ago, Louis Brandeis gave us a warning: “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”
We’ve reached the endpoint Brandeis feared. The British Economist magazine has even downgraded American democracy from “full” to “flawed” in its annual Democracy Index.
If we’re going to restore our democracy, we’ll need to deconcentrate all that hoarded wealth. Either that or we can sit back and await the day when representatives of five powerful families sit at a table in some dark restaurant and carve up our country.
Bob Lord, an Institute for Policy Studies associate fellow, practices tax law in Phoenix.