How do we know that squandering didn’t do the rich in? For starters, grand fortunes shrunk across the board in the mid-20th century. Both the sober and the squalid became significantly less rich as high taxes on high incomes reshaped America’s economic landscape.
One example: The plight of the Rockefellers, the only wealthy family that — over the long haul — has rivaled the Vanderbilts in our public imagination. The Rockefeller clan has certainly had its occasional bon vivants, but the family as a whole has maintained a much more fiscally “respectable” reputation. Yet the Rockefellers also spent the mid-20th century watching their grand fortune become less grand.
Remember Nelson Rockefeller, the long-time governor of New York and candidate for the Republican presidential nomination? “Rocky” never did win the GOP’s presidential nod. But President Gerald Ford did tab him as his vice-presidential successor after Richard Nixon’s resignation — and Ford’s subsequent elevation to the presidency — created a VP vacancy in 1974.
The GOP insider who vetted Rockefeller for the Ford White House, a lobbyist named Tom Korologos, began his vetting by asking Nelson the eternal $64,000 vetting question: Anything embarrassing in your background?
“I’ve got something to worry about,” Rockefeller reluctantly informed Korologos, who years later would recount the exchange to the Washington Post.
“His concern was that when it became public, he wasn’t going to be as rich as everybody thought he was,” Korologos told the Post. “He was going to be embarrassed among his peers that he didn’t have all the billions people thought.”
Mid-century America still had, to be sure, some people as rich as Nelson Rockefeller desperately wanted to be. But these would be rich people of a particular sort. In a 1969 book, New Yorker writer Kenneth Lamott gave these rich a name. He would call them “the Income Tax Rich.” You couldn’t enjoy a great private fortune at mid-century America, Lamont explained, unless you had a privileged relationship with America’s progressive tax system. You either had to have inherited your fortune from a time before taxes in the United States became steeply progressive. Or you had to have been doing your business in an industry — like oil — that shielded you from America’s steeply graduated tax rates.
The nation’s titans of “Big Oil” had that shield. They enjoyed a variety of special tax breaks — the notorious “oil depletion allowance” among them — that powerful politicians like Lyndon Johnson and long-time House speaker Sam Rayburn had spent decades protecting. A 1957 listing of America’s wealthiest in Fortune, the nation’s premiere business magazine, would illustrate just how effective these protections turned out to be. Fortune found only one contemporary American with a net worth over $700 million: the oilman J. Paul Getty.
In 1982, just a year or so into the explosion of inequality that Ronald Reagan’s 1980 election unleashed, Forbes magazine published its first annual list of America’s 400 richest. No economic sector had more moneybags on that inaugural Forbes 400 list than Big Oil, with 89. The next richest sector, real estate, contributed just 63 fortunate souls to the 1982 top 400.
The benefits from Big Oil’s preferential treatment at tax time became even more evident at the top of that first Forbes list. Only 13 billionaires appeared on the inaugural Forbes list of America’s 400 richest residents. Nine of these 13 billionaire fortunes rested directly on oil.
By 1982, America’s steeply progressive tax system had already begun becoming considerably less progressive. In the 1960s, the federal tax rate on income in the nation’s loftiest top bracket fell from 91 to 70 percent. In 1981, Congress dropped this top tax rate from 70 to 50 percent. The rate would fall to 28 percent a few years later, then bounce around a little before settling in at the current 37 percent.
The impact of these and other tax cuts on rich people’s fortunes? In 1982, America’s wealthiest needed a net worth of $75 million to enter the ranks of the Forbes 400, the equivalent of about $195 million in today’s dollars. The threshold to enter the 2018 Forbes 400: $2.1 billion.
In other words, between 1982 and 2018, the price for entering the ranks of the nation’s richest 400 rose — after taking inflation into account — well over 10 times over.
Lower taxes on the wealthy, to be sure, don’t explain all the reasons behind this enormous concentration of American income and wealth. Other factors — most notably the steady weakening of the labor movement — have also significantly impacted the nation’s tilt to the top.
But profligacy — of the sort assigned to the Vanderbilt family — plays no significant role here. Today’s fabulously wealthy are squandering just as profligately as their counterparts in days gone by. Their yachts stretch longer than football fields. Their private jets take their kids out on birthday parties. Their dogs wear bejeweled jackets.
And none of this profligacy matters. Our rich continue to get richer. The good news? We know how to slow their merry-go-round. Tax ’em!
***
Reposted from Inequality.org
