Follow this guide to ensure that your communities are not well-funded, public services are insufficient and inadequate, and public education remains undervalued:

1. Buy as many assets as possible that appreciate in value— art, real estate, stocks with wealth accumulated from the hard work of your coworkers and communities;
2. Borrow money against said appreciating assets to fund luxurious lifestyles (maybe a $55 million dollar wedding?);
3. Die and pass assets to heirs, avoiding taxation and keeping wealth hoarded amongst the very few rather than shared across the workforce that powered the growth.

Washington state has much abundance: natural resources, a highly intelligent workforce, rich agricultural areas, and lots and lots of wealth. We can transform this abundance into equitable, shared prosperity by investing progressive revenue into programs that benefit all of us; we can have universal child care, affordable health care, the best higher education institutions in the nation, the cleanest air, ample opportunities for great housing (be it social, rented, or owned). The list goes on. But we are prevented from realizing this vision because of the robber baron practice of buy, borrow, die — the cycle of wealth hoarding rather than reinvestment.

Buy & borrow

A worker making a median wage, around $64,220 per year, in the United States pays about 26.4% of their income towards federal, state, and local taxes. The ultra-wealthy (those in the top .001% often earning over $78 million per year) can pay closer to 0% thanks to tax-avoidance strategies minted in our tax code. High-wealth individuals avoid taxes by buying as many assets as possible that appreciate in value and then borrowing money against those appreciating assets through vehicles like securities-based lines of credit. For example, an early tech investor earns $10 million in stock in the 1990’s; that stock has grown significantly and is now worth $100 million. Let’s say this investor wants to throw an elaborate wedding for $3 million. Instead of selling the stock (and being taxed on the capital gains upon realization of the income), the investor can go to a major bank and open a securities-based line of credit, using his stock portfolio as collateral, to get a loan of $3 million.

Let’s pause there for a moment to point out two other realities of this borrowing scheme.

First, despite the luxurious habits of the ultra-wealthy, borrowing money to pay for their lifestyle still represents a minuscule fraction of their total wealth. A billionaire using a tiny portion of their total wealth to fund their lavish lifestyle would be equivalent to the average worker paying for all of their yearly housing, child care, food, transportation, and health care expenses with just $100 dollars.

Debt funded by banks typically requires interest rates, and the ultra-wealthy are given unfair borrowing advantages. For an average American worker, if they are lucky and can afford to purchase a home, they would be on the hook today for a 30-year fixed mortgage rate of 6.4%.  Ultra-wealthy people can borrow money at significantly lower rates: Fidelity, for example, offers a line of credit for $3 million at a rate of 1.9%. Pulling this back to the scale of an everyday worker, that would be the equivalent of about two dollars a year in interest. Through this process of borrowing against their assets, the wealthy avoid paying taxes because they are not realizing gains or making income, which would be qualified as taxable events. Meanwhile, their wealth quietly multiplies while they fail to pay what they owe to sustain the communities they live in and benefit from.

Die & continue tax avoidance

The final phase of this tax avoidance strategy for the ultra-wealthy is death and the passing of wealth to the next generation. A high-net worth individual’s estate is subject to the estate tax with an exemption of $15 million federally and around $3 million in Washington state. Wealthy households can avoid or minimize estate taxes with two primary strategies: first, through the creation of a trust for their heirs, and second, from the benefit of a policy called “step-up-in-basis”. There are multiple trust options, but the primary intention of a trust is to move wealth out of a taxable estate before death to minimize taxes. The most harmful of these is the dynasty trust, which allows wealthy individuals to pass on wealth in perpetuity, meaning a trust can hoard money forever with little to no taxation. The second strategy is the step-up-in-basis rule which “forgives” all appreciation of assets: as an example, a person could buy $10 million in stocks and earn $10 million in gains over their lifetime. Those gains would typically be subject to the federal capital gains tax rate at 20%, however, when the owner of those stocks dies and their heir inherits the $20 million in gain and principal, any prior gain is ignored and capital gains taxes on the $10 million are eliminated.

Not every wealthy person consciously exploits these loopholes — yet, our state and federal tax codes have made greed nearly consequence-free for those who do. While average Washingtonian workers struggle to make ends meet with wages earned in the warehouses, delivery vehicles, factories, and offices of the ultra-wealthy and contribute the greatest share of their income in taxes, the ultra-wealthy are permitted to bury profits in dynasty trusts rather than returning that wealth to the communities that created it. We are long overdue for a tax code that requires the ultra-wealthy to pay what they owe. Hoarding wealth is actively harming our communities, and we must demand a stop to these practices.