You Can Have Billionaires or You Can Have Democracy
The billionaire class isn’t just a group of people who happen to be superrich. It’s a dynastic oligarchy with a single overriding objective: controlling the government to protect its inherited wealth.
America’s dynasties have exponentially increased their fortunes since the early 1980s. (Naomi August / Unsplash)
- Interview by
- Luke Savage
With so much public attention fixated on the tycoons of big tech, it can be easy to forget that a historically more typical kind of extreme wealth — old money — is still alive and well. As a new report published by the Institute for Policy Studies (IPS) makes clear, in fact, it’s actually stronger than ever: America’s gilded dynasties having exponentially increased their fortunes since the early 1980s — and leveraged them so they can continue to grow in perpetuity.
Inequality expert Chuck Collins is a lead author of the new IPS study “Silver Spoon Oligarchs: How America’s 50 Largest Inherited-Wealth Dynasties Accelerate Inequality.” Collins spoke to Jacobin’s Luke Savage about his team’s findings and the breathtaking extent that current laws and regulatory frameworks allow extreme wealth to perpetuate itself across generations.
A phrase that stands out in your report is “the new feudalism,” which is meant to draw a distinction between the kinds of billionaires people tend to hear or read about and another, more dynastic kind. What were some of your top-line findings?
There’s an understandable focus on the first-generation billionaires — the Bezoses and Musks — and their surging wealth gains during the pandemic. But America also has growing and persistent “wealth dynasties”: multigenerational inherited wealth families. There are fifty dynastic families in the United States with a combined $1.2 trillion in wealth that we know of. Most likely there are trillions more hidden in trusts and offshore sites. The twenty-seven wealthiest families that were billionaires in 1983 have seen their wealth increase over 900 percent in the last thirty-seven years.
It’s interesting to see how the second and third generation, the inheritors, aggressively invest in “wealth defense” — lobbying to end the estate tax, create trusts, and hide wealth offshore.
These wealthy billionaire families are less focused on starting businesses and more on “dynasty-building” and rent extraction — passing wealth on over multiple generations in a neo-feudal way. With this system being solidified, today’s billionaires will be tomorrow’s dynastic families. If the pattern persists for twenty years on the current trajectory, we will have even greater concentrations of hereditary wealth and power dominating our politics, economy, media, and philanthropy. Looks like feudalism, smells like feudalism.
One of the great accelerators of billionaire wealth over the past several decades has obviously been tax policy. But your report also details a number of other significant drivers of dynastic wealth, including some lesser-known methods and loopholes. Beyond tax breaks, what would you say has driven/enabled this historic boom in old money fortunes?
Yes, tax cuts are only part of the story. These billionaires hire what sociologist Jeffrey Winters calls the “wealth defense industry” — tax lawyers, accountants, wealth managers — to figure out ways to sequester and hide wealth so it doesn’t even show up near a tax return. They play a global shell game of shifting assets around between anonymous shell companies, trusts, and offshore banking centers. They put billions into “dynasty trusts” that are formed in places like South Dakota where the state eliminated the rules to limit the lifespan of trusts and other legal arrangements.
Speaking of feudalism, South Dakota repealed its “rule against perpetuities,” an anti-feudalism measure in common law to prevent the deceased wealthy from lording over the living by prohibiting contracts, leases and trusts from lasting forever. By abolishing them, these states are effectively allowing trusts to exist for centuries — keeping wealth away from taxation and accountability. A hundred years from now, some of these trusts may hold trillions of dollars, assets that have never been taxed.
The question of inequality is obviously a moral and ethical one. But it’s ultimately a democratic question as well. Your study offers some pretty chilling anecdotes about dynastic wealth being deliberately weaponized for political ends.
What makes these billionaires true oligarchs is not just their substantial wealth but how they deploy their power, including their charitable giving. We document many examples of how they use both their political giving and (taxpayer subsidized) philanthropy to advance a selfish tax-cutting agenda.
One pretty powerful example comes to mind. The Mars candy family has seen their wealth increase by 3,500 percent since 1983 from an inflation-adjusted $2.6 billion to $94 billion in 2020. Over the last two decades, the family has spent millions lobbying to abolish the federal estate tax, the only levy on the inherited wealth of multimillionaires and billionaires. They also successfully lobbied to abolish the estate tax in Virginia, where they live.
This is a case study in oligarchic behavior: using your wealth to simply abolish a law you don’t like. They spent millions to save themselves billions.
In addition to analyzing the scale and drivers of dynastic wealth, your report also offers some modest proposals for addressing and reining it in. Putting aside the difficult question of how in the hell Congress could ever be forced to legislate some of these, which specific policies do you think would be required to break up or significantly weaken the power of these dynasties?
A couple things may happen. The Biden administration has been focusing on enforcement to rebuild the capacity of the IRS to monitor the tax shell games of the superrich. None of their proposals to increase taxes on the rich will work unless they do that and shut down this hidden wealth system.
At the end of 2020, Congress passed the Corporate Transparency Act to require corporations to disclose their real beneficial owners to the Treasury Department (it went through attached to the National Defense Authorization Act). Tax transparency activists are now working to ensure this law has teeth — and close the exemptions for trusts and partnerships.
The push to pass a global corporate minimum income tax led by Treasury Secretary Janet Yellen would require country-by-country tax reporting. So a global company like Apple would have to disclose every country where it pays taxes and how much it pays out. Most other G20 countries have been waiting for the United States to stop being the weak link and be part of global tax transparency efforts, so this could open lots of possibilities.
All these reforms could be stopped by the powerful billionaire class. But it’s also worth noting that the system is cracking both from the outside and within. There are defectors and whistleblowers inside these “wealth defense” firms that are leaking data and filling out more of our picture. This could embarrass and build even more pressure for more significant changes such as abolishing certain kinds of trusts that exist for the sole purpose of clouding ownership.
Senator Bernie Sanders has put forward legislation to reform that estate tax that includes a bunch of provisions to shut down loopholes and hidden wealth trusts. He and his team got help from estate tax lawyers who were sick of helping the rich and are helping write the new laws to shut down their tax dodging.