The top 10% of income earners are expected to benefit from the largest transfer of wealth in history.
- Younger generations—Gen X, Millennials, Gen Z—have struggled to amass wealth and raise collective social mobility in the same way that the Baby Boomers have been able to.
- With the Baby Boom generation currently between the ages of 60 and 80, they are expected to pass on $78.3 trillion in assets in the coming decades.
- Boomers, who have enjoyed a 500% increase in home values since 1983 and increased demand, have benefitted the most from the current market, where many young people and minority groups struggle to navigate the housing market.
- The existing tax code, benefitting from “giving while living” trends that help transfer money outside capital gains taxes, will likely see the largest transfer of wealth in history, mostly between wealthy families to their descendants.
- The transfer has critics of economic inequality calling fowl, with President Joe Biden having advocated for a 25% annual wealth tax for earnings over $100 million in his March budget proposal, The New York Times reports.
Why It’s Important
The 20th century brought about one of the greatest periods of wealth creation in human history. Businesses expanded, innovated, and supercharged better ways to live, creating jobs and shared ownership of growing businesses. While this boom continues, the wealth that was created over the last 50 to 60 years has increased in the stock market and has been passed between generations.
At the same time, the divide between the rich and the poor only continues to grow. The 2021 World Inequality Report found that the COVID-19 pandemic had facilitated one of the largest wealth transfers in history, with billionaires growing from owning 2% of the world’s total wealth to 3.5% in two years.
This trend has some analysts worried. Morris Pearl is a former BlackRock investor and the founder of the non-profit group Patriotic Millionaires, which advocates for the wealthy to pay more taxes. He tells The New York Times that the rich’s monopolization of resources could eventually threaten social stability and economic growth. “I have investments in companies that depend on growth. I’m not altruistic,” he says.
Vanguard global head Fiona Greig tells The Times that this transfer is reflected in the struggle for lower-income Americans to prepare for retirement appropriately, which could leave the majority of Americans unprepared to retire in their 70s.
RSM economist Joseph Brusuelas tells The Times that he believes that policy change will come soon as high-income workers begin to suffer greater negative side effects from the transfer. The form of that policy change remains unclear, as the president’s wealth tax proposal is unlikely to pass the Supreme Court without being struck down as unconstitutional.
“It’ll have nothing to do with social justice, nothing to do with right or wrong, and everything to do with the bottom line,” he says.
Others claim that redistributionist policies that tax the wealthy do more to reduce wealth and less to pull people out of poverty.