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More Debt Limit Discussion [1]
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Date: 2023-05-16
“In 1989, total family wealth in the United States was about $38 trillion, adjusted for inflation. By 2022, that wealth had more than tripled, reaching $140 trillion. Of the $84 trillion projected to be passed down from older Americans to millennial and Gen X heirs through 2045, $16 trillion will be transferred within the next decade.”
During our ongoing self immolation over the federal sovereign debt we should put the $31 trillion debt balance in context. An excerpt from a NYT article about ongoing wealth transfer is instructive. The Greatest Wealth Transfer in History Is Here, With Familiar (Rich) Winners
Does this suggest why the deficit is so high? People point to the size of the debt and suggest some action is necessary. It’s a big scary number but this helps put that number into context.
So private wealth increased by $102 trillion dollars since 1989. More than triple the full outstanding federal debt. What else happened during that period? The estate tax was gutted. (In 1981 the highest estate tax rate after the $5 million exclusion was 70% — after the 2017 tax cuts the estate tax rates were reduced to a range of 18% to 40% and the exclusion increased to $10 million — adjusted for inflation). www.irs.gov/…
A quote from the article’s interview with a rich heir: “I have right now in my stock portfolio, some stock that my wife’s father, who died a long time ago, bought in the 1970s — that investment has gone from a few thousand dollars to many hundreds of thousands of dollars,” Mr. Pearl noted. “I’ve never paid a penny of taxes on all that, and I may not ever, because I might not sell and then my kids are going to have millions of dollars in income that’s never taxed in any way, shape or form.
Mr. Pearl noted that people with only a couple of million can use ‘securities-based loans,’ borrowing low-cost funds from banks using the value of a given investment portfolio as collateral. ‘You just loan yourself money,’ he explained, and in many if not most cases, the portfolio’s rate of return exceeds the rate of interest on the loan.”
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