Episode Details

America is on the cusp of the largest inter-generational transfer of wealth in history. As wealthy boomers expire over the next three decades, an estimated $30 trillion will go to their children. Those children will be able to live off of the income these assets generate, and then leave the bulk of them – which in the intervening years will have grown far more valuable – to their own heirs, tax-free. After a few generations of this, almost all of the nation’s wealth will be in the hands of a few thousand family dynasties.

Unless Joe Biden’s new tax plan is enacted — the odds of which is moving from unlikely to likely. I’ll explain in a moment.

Dynastic wealth runs counter to the ideal of America as a meritocracy. It makes a mockery of the notions that people earn what they’re worth in the market, and that economic gains should go to those who deserve them. It puts economic power into the hands of a small number of people who have never worked but whose investment decisions have a significant effect on the nation’s future. And it is antithetical to democracy.

We are well on the way. Already six out of the ten wealthiest Americans alive are heirs to prominent fortunes. The Walmart heirs alone have more wealth than the bottom 42 percent of Americans combined. The richest 1 tenth of 1 percent of Americans already owns almost as much wealth as the bottom 90 percent.

The last time America faced anything comparable occurred at the turn of the last century, in the first Gilded Age. Then, President Teddy Roosevelt warned that “a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” could destroy American democracy. Roosevelt’s answer was to tax wealth. The estate tax was enacted in 1916 and the capital gains tax in 1922.

Since then, both of Roosevelt’s taxes have been eroded by the moneyed interests. As the rich have accumulated more wealth, they have amassed more political power — which they’ve used to reduce their taxes. By now, the estate tax affects only a handful of super-wealthy families that are busily setting up “dynastic trusts” to circumvent what’s left of it. And the capital gains tax has been defanged by what’s known as the “stepped-up-basis-at-death” loophole. More on this in a moment.

Last week Joe Biden unveiled two tax proposals that would revive Teddy Roosevelt’s original vision, and could possibly slow or even reverse America’s march toward oligarchy: (1) a minimum income tax that Biden calls a billionaire tax but would in reality apply to households with a net worth of $100 million or more, and (2) a separate tax at death on gains from appreciated assets, even if the assets are not sold.

The odds are growing that at least one of these proposals will get through the Senate in April or May via “reconciliation” requiring only a bare majority (i.e., all fifty Democratic senators plus the vice president). I’m told Joe Ma