chapter  8
22 Pages

The spiral of privilege and policy

Given how household wealth anchors economic security and well-being for American households, it is unsurprising that our government takes great interest in sponsoring its expansion. Consistent with its constitutional mandate to “promote the general welfare,” the federal government offers a variety of policies and tax deductions to assist households in their pursuit of wealth. What is surprising is the tilt to these policies. In earlier chapters, I examined assorted advantages and systemic privileges that aid affluent households in their quest for additional wealth. Given their range and extent, we might expect our wealth-building policies would target those households struggling to supplement meager bank accounts, buy a home, or set up a retirement plan. Rather than buttress the efforts of households with the greatest need, much of our public largesse benefits our wealthiest citizens. Further, the design of these programs emulates the self-reinforcing pathways already identified. Ostensibly open to all households, these programs funnel the greatest help to wealthier families. Since these policies generally offer open-ended assistance, their generosity rises with household wealth without limit. In this way, they reinforce the growing disparities in wealth that are undermining the reality of the American Dream. Our federal wealth policies include a mixture of income tax deductions and tax

credits along with our system of estate and gift taxes. American households gain hundreds of billions of dollars annually through various tax exemptions that help them as they journey along the wealth pathways. Conversely, our estate and gift taxes function to limit the transfer of wealth from one generation to the next. To describe how this system works, I must explain certain features of our tax policy, including the differences between tax deductions and credits. We must understand these tax policies in order to appreciate how their design reveals the intent of our policymakers as well as their long-term consequences. Understanding these details enables us to consider other policy designs that might redirect the assistance toward those households struggling to build their financial nest egg.