Evan Osnos exposes the many ways in which the ultra-wealthy shield their income from taxes even when they die, using loopholes that are not available to ordinary people. They do this while claiming to be philanthropists by putting their names on things, which are also forms of tax avoidance. But one the main ways they avoid taxes is by means of creating elaborate trusts that ensure that their children and their children pay little or no taxes on their inheritances when they die. These trust fund babies continue their tax avoidance schemes. The consequences are apparent.
And yet, in recent times, the fortunes of many prominent American clans have soared…. In 1978, the top 0.1 per cent of Americans owned about seven per cent of the nation’s wealth; today, according to the World Inequality Database, it owns eighteen per cent.
A century ago, American law handled the rare pleasure of a giant inheritance with suspicion. Instead of allowing money to cascade through generations, like a champagne tower, we siphoned off some of the flow through taxes on estates, gifts, and capital gains. As the Supreme Court Justice Oliver Wendell Holmes wrote in 1927, “Taxes are what we pay for civilized society.” But, since the late seventies, American politics has taken a more accommodating approach to dynastic fortunes—slashing rates, widening exemptions, and permitting a vast range of esoteric loopholes for wealthy taxpayers. According to Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley, the average tax rate on the top 0.01 per cent has fallen by more than half, to about thirty per cent, while rates for the bottom ninety per cent have climbed slightly, to an average of twenty-five per cent.
That lucrative maneuvering is the realm of specialized attorneys, accountants, and money managers, many of whom work for family offices: in-house financial teams that typically include a dozen or so full-time attendants… They tend to have no public presence—Gordon Getty’s family office is known, inconspicuously, as Vallejo Investments—but by some estimates they control about six trillion dollars in assets, a larger sum than is managed by all the world’s hedge funds.