Bill Gates recently wrote a blog/review of the Thomas Piketty’s Capital in the Twenty First Century saying that dynastic wealth, the idea that people in wealthy families just get richer from inheritance and not much else, is not really an issue in America. Plenty of people disagree with Gates, including his good friend Warren Buffet, but the critique is a bit hypocritical after the former Microsoft CEO bought an $18 million estate for his daughter Jennifer Gates.
Warren Buffet, when speaking to a Senate tax writers in 2007, made one problem clear.
“Dynastic wealth, the enemy of a meritocracy, is on the rise.”
Although Buffet didn’t push for a higher estate tax for people receiving large inheritances, he made it clear that the super-rich should be taxed at a higher rate.
Bill Gates takes the exact opposite stance, saying dynastic wealth isn’t an issue (although he agrees with a high inheritance tax.)
Gates points to the Forbes 400 richest people as proof, claiming that about half are successful entrepreneurs.
“I don’t see anyone on the list whose ancestors bought a great parcel of land in 1780 and have been accumulating family wealth by collecting rents ever since. In America, that old money is long gone—through instability, inflation, taxes, philanthropy, and spending.”
Wealth from assets in 1780, no, but there are quite a few from 1865. As Forbes pointed out, seven members of the Cargill and MacMillan family appear on an earlier list and can trace their own wealth back to a grain warehouse bought in 1865.
Then there are more well-known wealthy families on the list, like Koch and Walton. Although they might not be considered “old money” quite yet, they still embody the problem Piketty talks about, the wealthy getting wealthier for resting on their legacies.
Gates goes on to assert that since the aristocracy is kept in check by the natural forces of wealth decay, a progressive tax on capital returns isn’t the right approach. Instead it’s consumption that needs higher tax rates.
Whether or not America has a growing aristocracy aside, Bill Gates insists that his own vast wealth will not go into the hands of the his children in the op-ed, saying,
“Melinda and I are strong believers that dynastic wealth is bad for both society and the children involved. We want our children to make their own way in the world. They’ll have all sorts of advantages, but it will be up to them to create their lives and careers.”
Shortly after writing the review, Gates purchased an $18 million equestrian estate (that’s the rich person word for “horse-ranch) north of San Diego for his daughter. Jennifer Gates is an avid rider, who will likely make good use of the estate, which will no doubt be worth far more than $18 million when she passes it on to her own children.
Naturally there’s nothing wrong with Gates being an overly-generous father, but let’s face it, almost all children of the super-wealthy will live comfortable lives, far removed from the problems and labors of the rest of the country. The problem with income inequality is that it’s getting harder for people to achieve that comfortable life, and those in charge of making it easier are just disconnected.
I’m sure Bill Gates hears plenty of rags to riches stories, so many that perhaps he considers that the norm, but the reason those stories are so inspiring and interesting is that they are rare. People who make a fortune on their hard-work and perseverance should be praised, not because getting to the upper-class is easy and anyone can do it, but because there are so many hurdles along the way. And every year there seems to be more hurdles, and they’re usually put in place by people who never had to jump over them in the first place, people who are not bad, simply disconnected from the issue.
Bill Gates critique of Thomas Piketty’s book is good, but the subtle hypocrisy destroys any legitimacy in his claims.
[Image Credit: Remy Steinegger/Wikimedia Commons]