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September 25, 2012

Is Self-Made Wealth a Myth?
    by Robert Kropp

United for a Fair Economy analyzes the Forbes 400 list of wealthiest Americans, finding that 40% inherited considerable wealth, while a quarter earned their wealth through investment.

SocialFunds.com -- For the past 30 years, Forbes Magazine has published the Forbes 400 list of wealthiest Americans. Perhaps in response to growing criticism of wealth inequality in the US, Forbes pointed out that 70% of those included on this year's list "made their fortunes entirely from scratch." Forbes also reported that "the average net worth of a Forbes 400 member is a staggering $4.2 billion," the highest ever. In 1982, when Forbes launched the list, only 13 members were billionaires; now, all of them are.

Is the magazine's perpetuation of the self-made myth strictly factual? Not according to a new report, entitled Born On Third Base, from United for a Fair Economy, a nonprofit organization advocating for greater economic equality.

According to the report, the assertion by Forbes that 70% of those on the list are "'self-made' is a loaded one, suggesting that these individuals attained financial success independent of assistance from family and society." In reality, the report argues, among those included in the group "are many people born solidly in the top five or one percent, who may have inherited a business, attended Ivy League universities, and benefited from family connections."

Forty percent of those on the list inherited considerable assets from a family member, the report found, and over 20% inherited enough wealth to make the list by their inheritance alone.

The most common source of wealth among the members of the Forbes 400 is investment. Twenty-five percent made it onto the list because of investment income, more than twice the percentage of those who did so through technology, the second-most common source of wealth. "Tax loopholes, offshore accounts, and various other schemes allow the super-wealthy to use the tools of finance to protect their wealth and lower their tax rates further," the report observed. "Deregulation of banking has also contributed to financial speculation making up a larger and larger portion of our economy."

Additional factors that reveal the extent of wealth inequality in the US include the fact that Oprah Winfrey is the only African-American among the 400 members. Winfrey is also one of only 40 women on the list, 90% of whom inherited their fortunes. In 1982, the list included 75 women.

"Income from work should not be taxed at a higher rate than income from stocks, bonds and investment real estate," the report concludes. "To enable the 99 percent to save and build assets, the tax burden should be shifted back onto the wealthy, particularly concentrated asset-holders."

Less than a week after a leaked video caught him writing off 47% of the American electorate as believing "they are victims" and thus entitled to the largesse provided by government programs, Republican Presidential candidate Mitt Romney reiterated his support for a low tax rate on capital gains, arguing that it is "the right way to encourage economic growth, to get people to invest, to start businesses, to put people to work."

But as Joe Nocero wrote in The New York Times, "The American dream exists not because of the capital gains differential but in spite of it. It is the tax break that most glaringly exists to benefit the wealthy. If you have any doubts about that, all you need to do is read the latest Forbes 400."

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