You have to consult Dictionary.com for the definition of “trillionaire.”
Webster’s doesn’t yet recognize trillionaire as a word. But it will. If you’re under 60, America’s first trillionaire will likely appear in your lifetime.
And the recent budget deal in Congress does nothing to alter that scenario.
In 1982, Forbes magazine published its first survey of the 400 wealthiest Americans. The wealthiest American at that time, Daniel Ludwig, held a reported net worth of $2 billion. Bill Gates topped the 2013 Forbes 400 list at $72 billion. That’s a 36-fold increase in America’s largest fortune over 31 years.
And the increase could have been larger. By all appearances, Gates lost interest in building his fortune years ago. Had he not given away billions in charitable gifts since then and had his primary focus remained personal wealth accumulation, the Microsoft founder’s net worth would now top $100 billion. If you count total family wealth, Sam Walton’s heirs already are comfortably past the $100-billion mark after inheriting the Walmart fortune.
As Forbes acknowledges, its survey tends to undercount wealth. Last year, a Tax Justice Network analysis put the unreported global wealth stashed in offshore tax havens at $21 trillion.
The super-rich are setting new records, $10 billion, $50 billion, and soon enough $100 billion. Rather than objecting, our nation celebrates the increasingly obscene fortunes of the super-rich as we do athletes breaking sports records.
Reaching $1 trillion will be what hitting 73 home runs was before we knew Barry Bonds cheated to get there.
Will our first trillion-dollar fortune also be tainted by misdeeds of the achiever? Could that be what finally wakes us from our slumber?
A fortune worth $1 trillion — $1,000,000,000,000 — would today be enough to buy every square foot of real estate in Manhattan. A trillionaire could take everyone on the planet out for a $100 steak dinner, if we had a restaurant that could hold 7 billion people. A $1 trillion fortune would equal the wealth of a million millionaires.
What’s fueling this astonishing concentration of wealth? Tax policy. In Bill Clinton’s words, it’s just arithmetic.
All individuals face four principal constraints on the wealth they can accumulate: living expenses, the taxes they must pay on income from labor, the taxes they must pay on income from capital, and inheritance taxes. The roles those constraints play change as people move up the wealth scale.
At the bottom, living expenses and taxes on income from labor greatly impede the accumulation of wealth. But for the super rich, living expenses and taxes on income from labor have a negligible constraining effect, because these rich are pulling in income, mostly from capital, that dwarfs their living expenses.
Taxes on income from capital and inheritance taxes, in the end, stand as the only meaningful constraints on wealth accumulation by the super rich. But these taxes have decreased over recent decades. Policy makers have, in effect, lifted the lid on wealth accumulation by those who already have significant wealth, while holding firmly in place the lid on wealth accumulation for those who don’t.
And things are getting worse. States are engaging in a destructive “race to the bottom,” competing to see who can give the wealthy the best deal at tax time. At the federal level, an underfunded IRS cannot keep up with tax lawyers and accountants developing ever more sophisticated tax-saving schemes.
The unavoidable result: Wealth at the top is growing faster than everyone else’s wealth. That’s where the arithmetic comes in to play. If the wealth of one group grows at a faster rate than the nation’s total wealth, that group’s piece of the pie will increase. That’s a mathematical certainty.
And unless our leaders change course, America’s wealth concentration has no limit.
Bob Lord, a veteran tax lawyer and former congressional candidate, practices and blogs in Phoenix, Arizona. He is also an Institute for Policy Studies associate fellow.