Inheritance data explains the US economy

Investment Analysis Clubs Macro Economic Trends and Risks
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It’s important that poor people in the Red States not understand this and keep voting the same way. Keep the wealthy “tax free”.

Gifted link should open for you.

{{{ The U.S. tax system does little to temper our uneven inheritance. Consider the stepped-up basis provision, “one of the most egregious (tax loopholes) that we have,” according to Marc Goldwein, senior policy director at the nonpartisan Committee for a Responsible Federal Budget, who boasts the tax-loophole knowledge of a man with many times his net worth. }}}

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UPS buys red states. Same diff.

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Inheritance doesn’t “secretly explain” inequality. Anecdotally, I had made lots of money over the decades before my parents died. Look to things such as education, which is related to your parents wealth and starts much earlier in life.

DB2

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Which the article describes as wealth “inherited” as you grow up with the ability to pursue your dreams. We told our kids that we would pay for college, which they should consider their “inheritance.” As we did better than expected, we also funded their Roth IRAs while they did their 401Ks, and recently started gifting them dream money, for things like help with a down payment on a home, grad school, or starting a business. The article says that the prepaid inheritance is really the basis of the divide between the haves and have nots.

I will note that we also made sure to gift them with the understanding of want vs need, frugality, planning ahead…which is what we are doing with the gift money.

As we start with RMDs in about 10 years, we expect to have them help us with determining which charity to donate to every year via QCD. They’ve been doing their part to help the world out since they could walk, and this is just part of it.

Neither DH nor I come from wealth, unless it’s intellectual wealth, but we were installed with the understanding that we needed to make a plan and make it work. We have done this with the boys as well, but are adding a bit of seed money to it as well.

IP,
wanting the kids to learn how to handle money before a possible inheritance

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The crux.

I was included in meetings on the family budget from the time I was 8. And my parents and later my married siblings used direct blatant subterfuge successfully regarding inheritance.

“You will be completely on your own after you complete your education. Expect to inherit exactly nothing, as we will be leaving everything to wilderness preservation and human rights orgs or spending it all on ourselves… We will pay all reasonable costs of your education up through one advanced degree whereever you chose to go. Choose carefully, and study hard.”

Worked like a charm. And we all did so well that we never needed more funds, even though they jumped in like madcap elves from time to time with bags of funds that we had to figure out how to use.

david fb

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Of course it does. If you’re letting inherited wealth change hands tax-free (through the stepped-up cost basis), everyone else has to pay more in taxes to make up the difference.

When you look at these large, multi-generational fortunes, most of the value of the estate is in the lack of taxation over 8 to 10 decades, rather than whatever productive activity the first-generation innovators and workers were up to.

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Everyone hates the wealthy (rich). And inheritance tax law does keep their children in luxury.

Richard Reeves says income inequality is much more pervasive within the USA in his book.

There’s a certain type of financial confessional that has had a way of going viral in the post-recession era. The University of Chicago law professor complaining his family was barely keeping their heads above water on $250,000 a year. This hypothetical family of three in San Francisco making $200,000, enjoying vacations to Maui, and living hand-to-mouth. This real New York couple making six figures and merely “scraping by.”

In all of these viral posts, denizens of the upper-middle class were attempting to make the case for their middle class-ness.

Shed a tear for the professional class./sarcasm

Reeves’s book is out of date. Apparently now many millionaires consider themselves middle class.
https://www.cnbc.com/2023/11/10/survey-31percent-of-millionaires-say-they-are-part-of-the-middle-class.html#:~:text=Personal%20Finance-,31%25%20of%20millionaires%20say%20they’re%20part%20of%20the%20middle,People%20feel%20squeezed%2C’%20advisor%20explains&text=Only%20a%20small%20share%20of,harder%20to%20feel%20well%20off.
Only a small share of millionaires say they feel wealthy, according to a recent report.

Even among millionaires, only 8% would characterize themselves as wealthy these days.

Roughly 60% of investors with $1 million or more of investable assets said they are more likely upper middle class, according to a recent Ameriprise Financial survey of more than 3,000 adults.

To that point, 31% consider themselves decidedly middle class.

It’s rough out there. Cry them a river.
Seems to be quite a bit of denial out there.

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It depends on where you live and the circles you travel in.

A million dollars is a fortune in West Virginia or Mississippi.

If you live in a neighborhood in Silicon Valley with a lot of tech workers earning $500,000/yr, someone with a mere million is going to feel impoverished. I saw an article a while back that said a $50 MM net worth in Manhattan is “working class rich”.

interest

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They talked about that in the article:

“It’s not just the dollar amount that you get when your parents die,” Ricco said. “It’s the safety net that you had to start a business when you were younger, or the ability to put down a larger share of your savings into a down payment and a house because you know that you can save less for retirement.

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I relate to this. Though we now have more money than we need for ourselves, I am still the frugal New Englander who makes (admittedly awesome) soup stock from bones and drives a 2004 and 2013 vehicle, with no real desire to replace them. It makes me happy to conserve and extract value from something a less frugal person would just throw away. I find joy in making our money stretch, not by deprivation but by finding value. I would rather give money away than spend frivolously. It is who I am and DH is even worse. Frankly that’s how one amasses significant amounts of money, by creating a nest egg and putting it to work. I don’t see a need to consider ourselves “rich,” nor to act that way.

That said, I would really like to be able to pay someone to do work on the house, but they are simply not available, so we continue to build sweat equity. When we sell this house, I am really looking forward to more travel, for months at a time even, but we are not 5 star hotel people, eating out 3 meals a day, preferring to live as part of the community that we are exploring. Being in expensive hotels and fancy restaurants is stressful, even when someone else pays. DH’s work used to do that when he was needed for the annual meeting, so I can tell you from experience that I much prefer a lowly coffee maker in my hotel room than having to call a butler to bring me a cup of coffee to the room.

A zebra can’t easily change their stripes.

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Taxes are the tail that doesn’t wag the dog. Economic inequality starts long before inheritances kick in decades later.

DB2

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I thought that was white privilege.
:face_with_raised_eyebrow:
ralph

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Again, you are ignoring the non-monetary inheritance one gets by being raised by parents that have a clue. I was gifted by my parents the understanding of why to defer gratification, want vs need, the value of an education, and a DIY attitude. That small savings over time accumulate to real money. The very small $ inheritance at 45 did nothing for me, still growing in an inherited IRA from which I take small mandatory RMDs. Not quite true, as the RMD reminds me annually to reflect on all the gifts I “inherited” from my parents throughout my life. At 21 they also loaned me enough money to get me to the 20% down payment I needed when buying my first home. Complete with loan documents I drew up, and promises of foreclosure from tough guy Dad to hold me accountable.

And perhaps being held accountable was the most important gift of all. On the news this morning they interviewed some younger voters for whom school debt and Biden’s inability to give them relief was an issue they “were going to hold him accountable for.” WTH? No accountability for the debt holders not being able to pay for what they signed up for? I guess that’s what our country has become. Not too surprising given T’s love for bankruptcy and disdain for those not using that financial tool.

Yes, I inherited much more than cash, and well before they died.

IP

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I’m not ignoring it; that is part of the effect I was talking about that begins decades before your parents die.

DB2

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This is not a reply to @UpNorthJoe 's post.

I chose UNJoe cause he obviously enjoys cross country skiing.

I’ve xc skied exactly 1 time.

At least one more xc-ski experience is on my bucket list, but, a few rungs down.
Since I live in TX, such an adventure would be an extravagance.

The Bucket List, the movie, poses the question in a rather esoteric way:
Why shouldn’t I do some of the things today, that I didn’t do in the past cause I was “building $, being frugal, being responsible”? Back then, I either didn’t have the time or the money, or both. Now…?

Sky dive? I did the i-Fly.

A blast at 1m above the surface of the chamber! And 80% of the thrill of actual sky diving. The other 20% gotta be free falling with the possibility of …

i-Fly is for Seniors, too.

Drive a Shelby or other “fast car”? Never been on my list.

See the Himalayas? Sure, but down the list. I’d rather meet the Dalai Lama.
Or spend a month in an ashram.

Perhaps a month in Denver doing some magic? LOLOLOL

I find that getting out of the “I’m too poor to…” mindset, is difficult, as well as imperative.

Inheritance? I contribute a bit here n there, when it seems it’ll be helpful. I’m not waiting till after I die.
“Helpful” is in the eye of the beholder.
My heirs will get whatever remains.

:face_with_monocle:
ralph

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There was a remarkable discussion of income inequality and inheritance yesterday in a Health, Education, Labor & Pensions Committee Hearing chaired by Bernie Sanders.

One newly-appointed senator who inherited a multi-million dollar plumbing business from his father claimed that he “started from nothing” which prompted one of the labor leaders on the witness panel to call out the senator as a “liar and a fraud”. Great stuff. I wish we had more of this kind of truth telling in committee hearings.

And to be fair, there was House Committee hearing yesterday where the Chair called out a member of the minority as a “trust fund baby and a Smurf”. {{edit: further research reveals that the “trust fund baby” was a Congressman who is an heir to the Levi-Strauss fortune, not “the Smurf”.}} I’ll leave it to the reader to judge the accuracy of the charge.

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The best part was the senator challenged the witness to a fight, stood up and started taking off his jewelry, preparation for fisticuffs.

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It would be cooler if they could duel with pistols at 20 paces!

Heck, that way we might not even need a term limit.

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The Senator pointed out that fan favorite, President Andrew Jackson prevailed in no less than eight duels, and nearly died in one when he was shot.

https://constitutioncenter.org/blog/settling-scores-the-duels-of-our-forefathers

and who could forget this treasured piece of US history

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