SUBSCRIBE TO OUR FREE NEWSLETTER
Daily news & progressive opinion—funded by the people, not the corporations—delivered straight to your inbox.
5
#000000
#FFFFFF
5
#000000
#FFFFFF
chuck collins
Gilded Age for Billionaire Offspring as $5.2 Trillion Wealth Transfer Accelerates
"Without robust wealth and inheritance taxes," said one analyst, "the children and grandchildren of today's billionaires will dominate our future politics, economy, culture, and philanthropy."
Nov 30, 2023
The Swiss bank UBS released a report Thursday showing that a massive transfer of wealth from billionaire business founders to their heirs is underway and accelerating, with trillions of dollars in assets moving from those who accumulated fortunes through entrepreneurship to family members whose vast riches are owed to the simple accident of birth.
In the 12-month period between April 2022 and April 2023, newly created billionaires acquired more wealth through inheritance than entrepreneurship for the first time since UBS began studying billionaire wealth trends in 2015. The bank, a friend of the super-rich, said that 53 heirs inherited nearly $151 billion in wealth during the study period, exceeding the $140.7 billion amassed by billionaire entrepreneurs.
"This year's report found that the majority of billionaires that accumulated wealth in the last year did so through inheritance as opposed to entrepreneurship," Benjamin Cavalli, head of strategic clients at UBS Global Wealth Management, said in a statement. "This is a theme we expect to see more of over the next 20 years."
The latest edition of the Billionaire Ambitions Report estimates that the number of global billionaires rose by 7% during the one-year period analyzed by UBS, up from 2,376 to 2,544. The U.S. alone had 751 billionaires as of April 2023, 20 more than it had in 2022.
After falling in the wake of the coronavirus pandemic—during which billionaire wealth soared as millions died across the globe—billionaires' collective net worth "recovered by 9% in nominal terms from USD 11.0 trillion to USD 12.0 trillion," UBS found.
UBS estimates that more than 1,000 billionaires are over the age of 70 and poised to hand a combined $5.2 trillion down to their heirs over the next several decades, perpetuating inequality that is eroding democracies and fueling social uprisings worldwide.
"While this great wealth handover has long been anticipated," UBS said, "data suggests that it is now gathering momentum."
"A new, powerful, and unaccountable aristocracy is being created in front of our eyes."
Chuck Collins, director of the Program on Inequality and the Common Good at the Institute for Policy Studies (IPS), told Common Dreams that "this is how wealth dynasties are formed."
"The so-called 'self-made' billionaires invest in 'wealth defense' to pass as much wealth to future generations within their families," he said.
Collins argued that this ongoing wealth transfer "should be an occasion for substantial inheritance taxes, but given the porous and weak state of such taxes, we're seeing dynastic oligarchies grow."
"Without robust wealth and inheritance taxes, these intergenerational concentrations of wealth and power will grow," said Collins. "The children and grandchildren of today’s billionaires will dominate our future politics, economy, culture, and philanthropy—with huge billion-dollar legacy foundations. It is true that a small segment of the next generation will redeploy and redistribute some of this wealth to more socially positive ventures and organizations. But at this point, this is a tiny percent and not a substitute for a progressive tax system where the wealthy pay their fair share of taxes."
The UBS report notes that billionaires with inherited wealth "seem more reticent" than first-generation billionaires to pledge their fortunes to philanthropy, which the ultra-rich often use to avoid taxes.
According to UBS, just under a quarter of first- and later-generation billionaires said they are concerned about "developments in taxation," an indication that they don't believe world leaders will heed growing global calls for new taxes targeting the fortunes of the mega-rich and their offspring.
Oxfam International observed earlier this year that two-thirds of countries don't have any inheritance taxes and half of the world's billionaires live in those countries, allowing them to pass huge wealth down to future generations tax-free.
"A new, powerful, and unaccountable aristocracy is being created in front of our eyes," the group said.
Keep ReadingShow Less
What Should We Do About the “Carbon Barons?”
A new novel by Chuck Collins asks important questions about morality and strategy in the face of the climate emergency.
Jul 23, 2023
Chuck Collins’ new book Altar to an Erupting Sun may be fiction, but it poses a very topical, real-world challenge for readers: What’s the right way to act when facing an existential challenge like climate change?
Right off the bat, in the first chapter, we learn that the novel’s central character, Rae, is a climate activist who has been diagnosed with inoperable cancer. Having done her research to know the “carbon barons” responsible for so much destruction, she decides to “take one with her” by wearing a suicide vest. It works as intended, taking the life of a fossil fuel company CEO.
After the novel’s high-charged opening chapter, Collins pulls back to reveal the world Rae inhabited, which turns out to be one that is very true to the activism of the past half-century. The author, an activist as well as a writer, blends his book’s made-up characters with real people, including me at one point!
The question of how best to act when facing an existential crisis like climate change—and whether or not the crisis calls for violence—is a hot one right now.
In fact, elements of Rae’s community remind me of my own from the 1970s and 80s: Movement for a New Society. Like us, they try to live out their values, grappling with big questions: Can strong connections be built across race and class lines? Can polyamory be a valid option in their community? Can we handle this long struggle without burning out?
Were this a review, I would spend more time singing Collins’s praises for creating such a lovingly accurate depiction of activist life. But I want to instead return to the challenge posed by Rae’s decision. The question of how best to act when facing an existential crisis like climate change—and whether or not the crisis calls for violence—is a hot one right now. There’s a lot we can learn from Rae and her decision to inflict suffering and death upon a perpetrator of such actions. However, before we dive in, please be aware that some spoilers do follow.
An Action Not Easily Dismissed
After learning of Rae’s explosive act in the first chapter, I found myself eager to know what led her to that fateful day. Who is this activist? Thankfully, Collins turns back to tell her story.
Rae was brought up working class in a small town, goes to college, and finds a commitment to justice and peace that will shape her life. She learns organizing skills, studies social theory and how movements work, and discovers she can make a difference.
As her earlier life unfolds the reader can appreciate Rae’s leadership chops, notice her thoughtfulness in making other life choices, and watch her support others’ commitment to savor life even when flavored with struggle. She tries to make the consequences of her final act fall only on herself rather than comrades.
That brings us to the next step in Rae’s process of discernment: probable impact. Might this killing, even if morally wrong, be strategic in stopping the destruction of the climate?
Rae’s lover and her closest activist friends judge her act to be wrong, not to be viewed as a positive example for others. Nevertheless, they respect and love her, and they miss her.
Rae’s life and character prevent me from dismissing the killing as the act of a deranged person, just as during the Vietnam War those of us who knew Norman Morrison couldn’t easily dismiss his self-immolation outside the Pentagon office of the Defense Secretary. (When news bulletins reported Morrison’s act, without yet knowing his name, my telephone rang with friends wondering if it was me.)
Norman Morrison was on Rae’s mind toward the end of her life. She also read extensively about the German pastor Dietrich Bonhoeffer who, although a Christian pacifist, joined a plot to kill Adolph Hitler. (Bonhoeffer was discovered and put to death.)
Clearly, for Rae, the possibility of taking such an ultimate action only arises if we’re trying to stop a historic calamity. Morrison was moved by the self-immolation of Buddhist monks wanting to stop the horrific Vietnam War. Bonhoeffer responded to the danger of Hitler starting a world war.
Rae might not have disagreed with her friends that her act was morally wrong. She may have agreed with Bonhoeffer’s own judgment that his situation was so extreme that he was willing to do something wrong—if it prevented a monstrous war.
That brings us to the next step in Rae’s process of discernment: probable impact. Might this killing, even if morally wrong, be strategic in stopping the destruction of the climate?
The strategy question is not easy to resolve.
Strategists Use Drama to Build a Movement
One reason to choose Rae’s act is for its drama. Our typical activist one-off protests do little or nothing for the cause. As Martin Luther King, Jr. pointed out, campaigns are needed to make an impact. Rae knew that campaigns can be effective, and also found that drama helps campaigns to spur growth.
The act she was considering was certainly dramatic. Whether or not a dramatic act spurs movement growth, however, depends on whether the act’s witnesses will understand our movement’s message. An act can be seen as crazy, for example, instead of something that stirs empathy.
For that reason I’ve tried over the years to contrast my message as strongly as possible from that of my campaign’s opponent. The contrast can clarify and energize the message.
With our drama we created a vivid picture: U.S. warships pounding Vietnam with explosives that hurt and killed civilians, while our peace ship brought a cargo of medicines for those civilians. The U.S. government tried to stop us.
In the early days of opposing the war in Vietnam, for example, we found that countering U.S. government war propaganda was tough. Americans had no background or history with that part of the world and were easily duped by our government. The U.S. made a humanitarian argument, claiming that it was on the side of the Vietnamese people against “the wicked Communists.”
Academically-trained Americans wasted a lot of breath trying to argue their way through the thought barrier. To broaden the antiwar movement beyond the universities, activists needed a more dynamic approach. For that reason a group of us Quakers decided to send a sailing ship to Vietnam loaded with medicines for civilian casualties of the war. The Vietnamese coast was at that time blockaded with U.S. Navy warships.
With our drama we created a vivid picture: U.S. warships pounding Vietnam with explosives that hurt and killed civilians, while our peace ship brought a cargo of medicines for those civilians. The U.S. government tried to stop us.
As if that drama was not enough, it turned out that our ship, the Phoenix, was in critical danger. A U.S. Navy pilot told me when I returned home that he and other Navy flyers were aiming to attack and sink our ship when it was nearby.
Despite not being aware of this particular threat, I knew I was risking my life in the war zone. I also knew that if I did not survive, the story in the U.S. would likely be: “American Quaker dad killed by U.S. forces while bringing medicine to Vietnam.”
That kind of drama builds the movement because it sharpens the contrast between peace activists’ nonviolent action in Vietnam and the violence of the U.S. The Global Nonviolent Action Database has many cases in which movements grew rapidly, and won, when participants experienced violent repression.
Leaders of the U.S. nonviolent civil rights movement also understood this dynamic. When a campaign was losing momentum, tactics were sometimes added that increased the contrast between the nonviolent campaigners and the violent police. In Birmingham, Alabama, children’s marches served that function for the campaign; even the white racist perception of Black adults massing on the streets as “scary and dangerous” was undermined when children took the place of the adults.
“Young people who are united and want to live freely”—that’s the sort of image our dramas create when we want to contradict repression and climate destruction.
Understanding the Perpetrators of Climate Catastrophe
Throughout most of her life Rae is depicted as an able organizer and manager. She knows how to get things done. She’s an enthusiastic reader of analyses. Early in the book her choices of what to do and how to manage are consistent with her big picture. She’s so often successful because her expansive wisdom pays attention to the larger system and what creative alternatives can work within that context.
What, then, is her big picture when it comes to climate?
As I followed her journey I was surprised at Rae’s increasing obsession with people she calls the carbon barons, those managers among the economic elite who directly choose to dump carbon into the air for profit.
Rae dwelled on Bonhoeffer and his perception of Hitler’s role as central in organizing evil, but in the U.S. there is no central leader marshaling the U.S. carbon barons.
Yes, they are the personnel who carry out those acts, but here’s the problem: Those individuals are replaceable by the system. The heads of coal-loving investment companies like BlackRock and Vanguard are replaceable by the corporate structures that chose to hire them. For every corporate president who loses enthusiasm for climate disaster, a half dozen executives are eager to replace them.
To try to understand how the thoughtful Rae could have made this mistake, I remembered back to when I was dealing with a major cancer that seemed likely to kill me. Cancer was Rae’s situation at the time she was considering her extreme action. When I was ill my perception of the world shrank enormously. I lost my ability to think analytically about the larger world.
Dealing with my illness and taking in the loving care of my friends and family were as much as I could handle. At times even the hospital room seemed very large to me: What I could experience aside from the intensity of my body was the bed and the friend holding my hand.
Because of that experience, I can relate to Rae’s shrinkage of attention. Her previous knowledge about how systems work no longer mattered; the most she could manage in the midst of her pain was overly-simple: The carbon barons are the enemy, and we need to stop them. Perhaps she could stop at least one before she died. She could hope other activists will follow her example.
Rae dwelled on Bonhoeffer and his perception of Hitler’s role as central in organizing evil, but in the U.S. there is no central leader marshaling the U.S. carbon barons. Leaders can be replaced by their corporate boards. Giant banks and corporate entities are the primary drivers of the climate catastrophe.
The picture of the world embedded in Rae’s act was fundamentally wrong. Individuals are not in charge of the profits-over-people-and-nature machine that has been destroying lives for many, many decades. It is a system. Systems can be changed, but not by removal of replaceable parts.
For these reasons, her act was not only ethically wrong, but also un-strategic. Rae was right to “follow the money” to get at the problem, but then she needed to name the system and figure out how to change it.
Successes to Learn From
When I try to take on something hard—like the power of the economic elite—I look around to see if there’s someone from whom I can learn. I want to know: What’s their secret?
I’m not unique: It’s standard practice in many crafts and professions to look around and learn from “best practices.”
According to Active Sustainability’s international newsletter, the Nordics are at the top of global sustainability rankings: “These countries have held these positions for years thanks to their leadership in governance, innovation, human capital and environmental indicators.” While the Norwegian parliament has approved plans for climate neutrality by 2030, the European Union is aiming for 2050. A real trailblazer is Denmark, which has successfully cut its CO2 emissions by more than half since 1996—largely by sourcing 47% of its electricity from wind power.
To reverse their condition, the Nordic people discovered the power of nonviolent struggle and coops. Their movements launched nonviolent revolutions that ended the domination of their economic elites—the very people who would today be their “carbon barons.”
Before someone objects that those are small countries, consider this: Those “small countries” used to be in such bad shape that Swedish and other Nordic people fled to the U.S. for the hope of a decent life. What good was their smallness doing them at that time?
The Nordics’ then-desperate condition was no accident: A century ago when their poverty and lack of good education, health care and jobs beset them, their economic elites were running the countries. The Nordics needed a revolution. To reverse their condition, the Nordic people discovered the power of nonviolent struggle and coops. Their movements launched nonviolent revolutions that ended the domination of their economic elites—the very people who would today be their “carbon barons.”
What the Nordics’ story demonstrates for climate warriors is that Rae is right. Yes, it is necessary to take away the economic elite’s domination. Unfortunately, that is news even to most climate-concerned people.
Swedish climate activist Greta Thunberg reminds us that even the achievements of the Nordics so far are not sufficient in the race against time. She wants her people to run toward the goal, not walk.
As an American, I’m enthusiastic about learning to walk before advising other countries how to run. But watch out: Once we learn to wage a nonviolent revolution that replaces the economic elite with a democracy, I believe we will be ready to move fast.
In the meantime, books like Altar to an Erupting Sun can help us prepare by sparking our imaginations, getting us to think critically about strategy, and reminding us to stay close to one another.
Keep ReadingShow Less
The Near-Future Eco-Fiction That Is 'Altar to an Erupting Sun'
Chuck Collins, author of the new novel that anticipates our “collision course toward a climate catastrophe,” notes that “fiction can play an important role in imagining how we move forward.”
May 18, 2023
Within a mere few pages of his debut novel, Altar to an Erupting Sun, Chuck Collins of Guilford, Vermont, sets the stage for his heroine, Rae Kelliher, to carry out a well-planned murder/suicide. Kelliher sacrifices herself to a cause, taking out an oil baron for his role in delaying responses to climate change. Complicating the aftermath, two of the CEO’s children are killed in the process.
In Altar, a work of near-future eco-fiction, Collins welcomes us into a world where visionaries and activists wrestle with climate disruption in the recent past to our present and several years beyond. Rae Kelliher is a life-long activist focused most on the environment, though her reach spans other causes. Throughout the novel, we see what makes Kelliher tick. From wrestling with her Ohio past and a myopic brother to her meticulous research into, and near-obsessive behavior around, a cause, we see that she is a force to be remembered. And she is.
Seven years after her dramatic demise, Kelliher’s Vermont farm community — which she and her husband, Reggie, nurtured — gather to honor her, to try to understand her violent exit, to grapple with the work yet to be done. In the end, it’s clear that Rae Kelliher did not die in vain.
A fortunate son pays it forward
From his native Madison, Wisconsin, Collins, 63, first came East in 1977. At 18, he worked in Worcester, Massachusetts, with Mustard Seed Catholic Worker Community for a few years before matriculating at Hampshire College. He came to northern New England first through Greenfield, Massachusetts, and from there to Southeastern Vermont.
“I started building a cabin in Guilford,” he said. “The appeal was the rural area and the ways in which Vermont has proven itself to be a sort of lab for regenerative economy.”
In a life committed to economic justice and equality, and, more recently, to climate health, Collins, founder of United for a Fair Economy, is director of the Program on Inequality and the Common Good at the Institute for Policy Studies in Washington, D.C., where he co-edits Inequality.org, which, since 2011, according to the website, has tracked “inequality-related news and views” that address the question: “What can we do to narrow the staggering economic inequality that so afflicts us in almost every aspect of our lives?” In addition, Collins co-founded the website DivestInvest and is a trustee of the Post Carbon Institute, which publishes the website, Resilience. A board member of the Windham and Windsor Housing Trust, he was instrumental in shaping that organization.
Author of numerous articles and several nonfiction texts — among them, The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions and Born on Third Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Wealth Home, and Committing to the Common Good — Collins has been a presence on CNN and on NPR’s "Fresh Air"; in print he’s been featured in publications from The Hill to The Sun magazine, all a credit not only to his experience but also to his perspective on economic inequality in the U.S. and worldwide.
Collins has been there. Growing up in the wealthy suburbs of Detroit, he says, he became increasingly aware of inequality in his youth. At 26, he came into a sizable inheritance from his great-grandfather, the German-born immigrant entrepreneur Oscar F. Mayer: in turn, he donated it all to social justice causes and foundations — choosing, instead, “to work for a living,” he said. “I needed to make my own way.” Acknowledging his multigenerational advantage, he adds, “That’s the hand I was dealt: I chose not to go there.”
Storytelling as a tool for activism
About his departure from nonfiction, Collins notes that as in his current work, published by Green Writers Press of Brattleboro, Vermont, “fiction can play an important role in imagining how we move forward.” Collins said that he “didn’t set out to write a novel.” But he added that he was inspired by his wife, Mary Wallace Collins, a real estate agent who is also accomplished at storytelling, an art he’s honing. He’d had the characters, plot, setting, and theme in his back pocket for a while, he said, and so he set it to paper.
Collins said that “we’re on a collision course toward a climate catastrophe. We know what’s required, but we’re at an impasse — a powerful industry has been blocking progress for 40 to 50 years,” he said. “How do we make sense of it and what do we do? There’s lots of bleak imagery in art, but in the work of Ursula K. Le Guin, for example, we see visions of how we can live with hope.”
Altar “is a formation story,” Collins explained—one about how people, relationships, experiences, and movements shape us. Weaving in the history of protest and its key players in recent decades and recalling events (such as the partial meltdown of a Three Mile Island nuclear reactor, the Nicaraguan Revolution, and the IranContra political scandal) and dissidents (from Henry David Thoreau to Dietrich Bonhoeffer, Dorothy Day, the Berrigans, and other progressive Catholics), the new book is, he said, “a bildungsroman for adults.” Moreover, he added, “the story is an altar to people who have sacrificed to social movements.”
A leitmotif, the altar reminds the reader at several junctures that there are sacrifices to be made ubiquitously; there are forces of evil working against efforts to ameliorate climate change; there are saints among us to be revered. “To bring their stories to the fore is to honor them,” Collins said.
“How we die says a lot about how we live,” he says. Rae Kelliher’s act is extreme in extreme times—and one that contradicts her life of nonviolent protest. Collins also tells the story through Kelliher’s journal entries, like this one: “My memory is sharp. I can’t seem to erase some images and experiences. My mind travels to Montague Farm, the soup kitchen in Mexico, the blockade of the pipeline. I can see each scene vividly. […] I rediscovered this Utah Phillips quote that has new meaning for me now: ‘The Earth is not dying—it is being killed. And the people who are killing it have names and addresses.’ What action is justified in defense of my body, our one and only Mother Earth?”
“We, the human project, have power still,” Collins says. “If we all knew then what Exxon knew 40 years ago, we’d have responded differently to avert disaster.” As it is, Rae Kelliher notes that “thousands of innocent people are dying or will die because of climate disruption.”
On Earth Day 2022, Wynn Bruce, 50, of Colorado set himself on fire on the steps of the Supreme Court. Some say he struggled with mental health; others say he was deeply disturbed by climate change and this was his protest.
Most can’t conceive of doing what Kelliher did in the pages of Collins’s book or what Bruce did in real life. Collins would then press a reader about what would effectively protest the status quo and compel change. “What would you do?” he would ask. “What bold act will it take?”
For the novel's release, Collins has launched a book tour across New England this month to read from and discuss Altar to an Erupting Sun. Please find book tour dates and a discussion guide at the website here.
A version of this article originally appeared in The Commons, Brattleboro, Vermont on May 10, 2023.
Keep ReadingShow Less
Sanders Estate Tax Bill Shuts Down Wealth Hiding Loopholes
The Vermont senator and former presidential candidate takes shot across the bow of the wealth defense industry.
Mar 25, 2021
Senator Bernie Sanders has introduced two new pieces of legislation, including a bill to restore the corporate tax rate to its pre-Trump levels. The second bill, the "For the 99.5 Percent Act," is a reform of the federal estate tax, our nation's only levy on the inherited wealth of multi-millionaires and billionaires.
This estate tax reform is important for several reasons. It institutes a graduated rate structure, so that the wealthiest billionaires pay at a higher rate. Under current law, a rich person with $25 million will pay the same estate tax rate as an oligarch with $25 billion. Sanders proposes a 65 percent top tax rate on estates over $1 billion, a restoration of the highest rate that existed between 1942 and 1976.
"At the end of the day, we need massive tax reform in this country, so that we end the tax loopholes and the giveaways that the wealthy and large corporations."
--Sen. Bernie SandersThis will greatly slow the build-up of inherited wealth dynasties, especially if combined with an annual wealth tax, along the lines introduced by Senator Elizabeth Warren and Rep. Pramila Jayapal.
But one important feature of the Sanders bill is that it closes down some of the more insidious ways that the wealthy avoid estate taxs. While most attention will be focused on the higher rates and lower exemptions, some of the most meaningful provisions are tucked into the "loophole closing" section. As Sanders told NPR, "At the end of the day, we need massive tax reform in this country, so that we end the tax loopholes and the giveaways that the wealthy and large corporations."
Over the last two decades, right-wing anti-tax groups failed to abolish the estate tax, though they have come close on several occasions, most recently as part of the 2017 Trump tax cut. They did succeed in raising the exemption so that in 2021, only those with wealth over $11.7 million--or a couple with $23.4 million--are subject to the tax.
Behind the scenes, however, the real attack on the estate tax has taken place in the offices of tax lawyers, accountants and wealth managers who are paid millions to hide trillions of wealth. This "wealth defense industry" serving the super-rich has gotten adept at creating complex tax dodging vehicles, including dynasty trusts, grantor trusts, manipulation of valuations, and other mechanisms so complicated that I'd lose your attention, dear reader (For an accessible primer on this topic, check out my new book, The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions).
What's important is to understand that these are intentionally intricate and impenetrable. The wealth defense industry thrives on the creation of complex trusts, opaque transactions, and volumes of paperwork that justify their highly paid services. Complexity is their bread and butter.
The Sanders team, however, is undaunted. As part of the "For the 99.5 Percent" estate tax reform, they take direct aim at these sacred planning devices.
One wealth advisor, Martin Shenkman, sounded the alarm in Forbes when Sanders first suggested these provisions in 2019. "Whoever helped craft those proposals understood many of the tax planning strategies the uber-wealthy use to shift assets outside their trusts," Shenkman complained.
"Bernie's changes include restrictions on the use of valuation discounts, GRATs, and more that have been the grease for many estate plans," wrote Shenkman. Sanders' provisions "would emasculate this type of planning and might result in a costly tax after fifty years of a trust." Shenkman advised his clients to go out and create new dynasty trusts before a Sanders law could take effect.
"Sanders estate tax reform legislation is a truly a plutocracy prevention act, squarely aimed at preventing the children of today's billionaires from accumulating democracy-distorting concentrations of wealth."
One provision of the bill would end tax breaks for dynasty trusts, a form of trust that can exist for centuries of tax avoidance. Billionaire dynasties like the Walton family and the late Sheldon Adelson have manipulated the rules of trusts for decades to pass on billions in wealth to their children while avoiding estate and gift taxes. The Sanders bill would:
- Strengthen the "generation-skipping tax," which is designed to prevent avoidance of estate and gift taxes, by applying it with no exclusion to any trust set up to last more than 50 years.
- Prevent abuses of grantor retained annuity trusts (GRATs) by barring donors from taking assets back from these trusts just a couple of years after establishing them to avoid gift taxes (while earnings on the assets are left to heirs tax-free). The lawyer who invented this technique for the Walton's claims it has cost the Treasury $100 billion since 2000. This is grotesque understatement.
- Prevent wealthy families from avoiding gifts taxes by paying income taxes on earnings generated by assets in "grantor trusts."
- Sharply limit the annual exclusion from the gift tax (which was meant to shield the normal giving done around holidays and birthdays from tax and recordkeeping requirements) for gifts made to trusts.
The Sanders bill would also close other common loopholes used by estate planers called "valuation discounts," restrictions placed on interests in family businesses that are claimed, falsely, to reduce the value of the estate. Another loophole game involves claiming that the value of an inherited asset is lower, for estate tax purposes, than what is claimed for income tax purposes to calculate gains when the asset is sold.
Sanders estate tax reform legislation is a truly a plutocracy prevention act, squarely aimed at preventing the children of today's billionaires from accumulating democracy-distorting concentrations of wealth. But its most important provisions may be in the "fine print."
Keep ReadingShow Less
Stephen King Meets the Estate Tax
Dec 18, 2009
Imagine a story about tax policy created by horror writer Stephen King. A fictional Congress, divided between anti-tax ideology and fiscal responsibility, amends the inheritance tax on the very wealthy so that it disappears entirely one year and then returns at steeper rates the following year. Over the "zero year," death rates skyrocket in the nation's most affluent ZIP codes. Seemingly robust and healthy billionaires perish in mysterious accidents. Lexus wheels fall off from Bloomfield Hills to Scarsdale to Beverly Hills. Sailboats and yachts inexplicably crash in calm coastal and Caribbean waters. Tainted champagne wipes out clusters of prosperous alumni at class reunions from dozens of elite prep schools from Groton to Choate.
Meanwhile, thousands of infirmed elders take their own lives in organized rituals called "legacy sacrifices." Pledging unlimited inheritances to their heirs, these multi-millionaires die with smiles on their faces knowing they've outfoxed Uncle Sam one last time.
If only this were a fiction.
We could actually see these scenarios play next year, unless the real U.S. Congress takes action and prevents one of the more bizarre twists in tax legislation in history from coming to pass.
In 2010, the estate tax, our nation's only levy on inherited wealth, is set to disappear completely. Then in 2011 the tax returns to 2001 levels, with substantially lower wealth exemptions and higher rates. Talk about perverse incentives.
The stage was set for this scene in 2001, when President Bush and conservative tax cutters tried to abolish the estate tax. They didn't have the Senate votes, however, for permanent repeal, nor could they afford to lose the hundreds of billions of dollars the estate tax would generate over the subsequent decade.
Congress structured the law to gradually phase out the tax, allowing it to expire in 2010. Then, in a gimmick to mask the real cost of the tax cut, the law sunsets in 2011, reverting back to its 2001 levels.
Tax cutters in 2001 were confident they would return in subsequent years to finish off the estate tax. But the nation's fiscal situation immediately began to deteriorate and Republicans lost their majority in Congress. In October of this year, the organized wealthy families that spent millions in lobbying Congress to save billions finally conceded they lacked the votes to get rid of the estate tax forever.
You have to remember that the estate tax - at its 2009 level - affects only one in 500 estates. Over the last eight years, the law has been revised so the wealth exemption level rose from $1 million to where it is today, at a generous $3.5 million or $7 million for a couple. Rates declined from 55 percent in 2001 to 45 percent today. This exclusive tax cut for multi-millionaires and billionaires cost hundreds of billions of dollars in lost revenue, a cost added directly to our national debt.
Two weeks ago, the U.S. House of Representatives voted to freeze the federal estate tax at this current level. This is a positive and responsible step. Now the Senate must act.
The Senate could pass legislation that mirrors the House version and settle the issue for years to come. Or they could freeze the tax at its current level for one year - and take it up next year. What they shouldn't do is further weaken the estate tax by passing proposals such as those introduced by Sens. Jon Kyl, R-Ariz., and Blanche Lincoln, D-Ark.
Without the estate tax, we could lose almost $1 trillion in revenue over the next two decades. There are only three ways to fill that gap: cut spending, raise taxes on the middle class, or - our current favorite - pile it onto the national debt. Instead of leaving prodigious amounts of debt for the next generation, we should retain a meaningful estate tax.
During a time of war and economic crisis, the idea of further tax breaks for multi-millionaires and billionaires is unseemly and unfair.
Keep ReadingShow Less
See More
Most Popular
To inform. To inspire. To ignite change for the common good.
News & Opinion
Trending
Common Dreams, Inc. Founded 1997. Registered 501(c3) Non-Profit
Privacy Policy