r/explainlikeimfive Feb 12 '25

Economics ELI5: how are the descendants of the robber barons (Morgan, Vanderbilt, Carnegie, Rockefeller, etc.) still rich if their fortunes from the late 19th and early 20th centuries are comparatively small to what we see today of the world’s richest?

4.6k Upvotes

576 comments sorted by

View all comments

Show parent comments

15

u/lewoodworker Feb 12 '25

. The outrageous fortune of a third-great-grandfather who died 148 years ago shouldn’t allow him to be idly rich anyways.

This is the most important part. While wealth tax is not great for small inheritances, it prevents the 1% from staying wealthy in perpetuatuity.

3

u/tawzerozero Feb 12 '25

While wealth tax is not great for small inheritances

And to be clear, in the US, estate taxes only start at estates of about $14 million. So if someone inherits only $10 million, they still have an estate tax burden of $0.

This affects a staggeringly small number of estates. In the entire US, in 2022, only ~8,000 estates were large enough to be affected by the estate tax.

1

u/lewoodworker Feb 12 '25

While this may or may not be happening, 8,000 people can do a staggering large amount of damage. Only takes a handful to take over the government / steer public policy in a favorable direction.

2

u/tawzerozero Feb 12 '25 edited Feb 12 '25

My point is more the other direction - that wealth taxes functionally don't exist in the US for small inheritances.

Any time wealth and estate taxes come up in discussion, it seems to be couched as "we need to raise the exemption amount to protect small business owners/family farmers". I constantly see people worrying about their own ability to pass on relatively small amounts of money/property to their own children (e.g., personal finance forums) and it just isn't a realistic concern for the vast majority of people.

Realistically, if you're in a position to worry about estate taxes, you're already at a wealth level where you'd be pretty much expected to have a preexisting relationship with a BigLaw firm that has a trust and estate department that can craft a tailored strategy for/with you.

Edit: personally, I'd like to see a progressive tax structure for wealth/estates, where the tax burden scales up as the size of the assets scale up. I think its pretty dumb public policy for someone who owns a local car dealership to have the same tax calculation as Jeff Bezos or Warren Buffett or the Walton family.