How we can prevent the wealthiest of our wealthy from exempting virtually unlimited billions from tax.
The collective wealth of the seven wealthiest Americans, all white men, has now just about reached $1 trillion. These seven pay virtually nothing in income tax.
This past April, I reported on another obscene milestone in U.S. wealth concentration. Back then, for the first time ever, $1 trillion sat in the pockets of just eight rich guys, a group small enough to squeeze inside a single SUV.
Today, barely four months later, that “trillion-dollar club” will shortly kick another member to the curb. According to Forbes, the collective wealth of America’s seven wealthiest white men — Jeff Bezos, Elon Musk, Bill Gates, Mark Zuckerberg, Larry Page, Sergey Brin, and Larry Ellison — stood at $996 billion at the end of the day yesterday. The seat in the Trillion-Dollar SUV about to be vacated belongs to Warren Buffett. The trillion-dollar club’s deep pockets soon won’t need his $100-billion net worth to make a trillion. So long, Warren.
Think about that. Just seven guys now control about $1 trillion in wealth, a sum nearly equal to one-third the $3.5-trillion package now before Congress for desperately needed programs that range from dental and vision care for seniors and child tax credits for rescuing millions of families from poverty to measures that can save our burning planet from climate change.
Put another way, the cost of what some are vilifying as “unaffordable” social spending for a nation of 330 million turns out to be barely three times the wealth held by just 0.0000022 percent of our U.S. population.
The still deeper connection between the wealth of our “trillion-dollar seven” and that $3.5-trillion in social spending: Whether that spending becomes reality likely will hinge on the votes of so-called political moderates who insist the program must by “paid for.” Those same moderates will hold the deciding votes on the “pay fors” advocates for the social spending are proposing: increased taxes on the country’s enormously rich, including the trillion-dollar seven.
And that gets us back to how we got into this mess in the first place. ProPublica recently exposed what many of us already suspected: Our trillion-dollar seven — and their fellow billionaires — barely pay any tax as a percentage of their true income. Between 2014 and 2018, America’s 25 top billionaires paid federal income tax during that five-year period equal to just 3.4 percent of the increase in their collective wealth over that same period.
Can we change this dynamic?
Yes, but to do so, those political moderates will need to agree to end the tax-avoidance strategy — “Buy-Borrow-Die” — that allows billionaires and the merely super-rich to escape tax on the enormous gains they realize on their investments. This scam works really quite simply. The wealthy buy an investment or, in the case of the trillion-dollar seven, found a company. Then, as their asset soars in value, they never sell. Instead, they borrow against the increased value of their asset whenever they need cash. Finally, they die, and each death wipes off the tax liability on all the gain that’s gone untaxed, sometimes for an entire adult lifetime.
What makes the Buy-Borrow-Die strategy possible? The gaping loophole in our tax law known as “stepped-up basis.” Under this loophole, those who sell inherited assets get treated as if they had purchased the assets at their fair market value on the date of the deceased owner’s death. The end result: If Jeff Bezos’ children inherit his Amazon stock, about $200 billion in gains will face no tax at all.
Our political leaders have been aware of the stepped-up basis loophole for decades, yet have done nothing while the super-rich have been using Buy-Borrow-Die to accumulate obscene piles of untaxed wealth.
But the Biden administration is now calling for Congress to end stepped-up basis to fund the programs we need to move our country forward. Will our lawmakers now summon the courage to tax the trillion-dollar seven? Or will our nation’s wealth continue to concentrate — into a trillion-dollar six?
We’ll soon know.
Bob Lord, a veteran tax attorney and Institute for Policy Studies associate fellow, currently serves as tax counsel to Americans for Tax Fairness.