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Noah Smith

Higher Estate Taxes Can Prevent a Nation of Dynasties

Wealth concentration might not be as problematic if so much of it wasn’t passed from generation to generation. 

Oh dear, um, no.

Oh dear, um, no.

Photographer: Eric Feferberg/AFP/Getty Images

It makes sense that President Donald Trump would change tax law to favor inherited wealth. The real-estate-entrepreneur-turned-television-host got his own start thanks to a super-wealthy father, and ended up inheriting hundreds of millions of dollars (much of it sheltered from taxes). Trump’s tax reform, passed in late 2017, makes it easier for people to follow in his footsteps. It increases the amount of money a married couple can pass to their heirs free of tax, to $22.36 million. It also raises the amount that rich people can leave directly to later family generations without paying the generation-skipping tax. Though the higher limits are set to expire in 2025, it leaves a window for rich people to avoid taxes permanently by placing their assets in dynasty trusts.

This is exactly the opposite of the direction the nation needs to be going. Since the late 1980s, the U.S. has seen the fraction of wealth owned by its richest people more than double: