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How Wealth Inequality Spiraled Out of Control | Robert Reich - YouTube
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elon musk's wealth has surpassed 200
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billion dollars it would take the median
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u.s worker over 4 million years to make
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that much wealth inequality is eating
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this country alive
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we're now in america's second gilded age
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just like the late 19th century when a
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handful of robber barons monopolized the
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economy kept wages down and bribed
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lawmakers
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while today's robber barons take joy
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rides into space the distance between
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their gargantuan wealth and the
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financial struggles of working americans
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has never been clearer during the first
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19 months of the pandemic u.s
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billionaires added 2.1 trillion dollars
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to their collective wealth and the rich
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have enough political power to cut their
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taxes to almost nothing sometimes
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literally nothing in fact jeff bezos
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paid no federal income taxes in 2007 or
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in 2011. by 2018
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the 400 richest americans paid a lower
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overall tax rate than almost anyone else
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but we can't solve this problem unless
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we know how it was created in the first
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place
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let's start with the basics
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wealth inequality in america is far
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larger than income inequality
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income is what you earn each week or
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month or year wealth refers to the sum
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total of your assets your car your home
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art anything else you own that's
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valuable valuable not only because
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there's a market for it a price other
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people are willing to pay to buy it but
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because wealth itself grows
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as the population expands and the nation
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becomes more productive the overall
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economy continues to expand this
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expansion pushes up the values of stocks
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bonds rental property homes and most
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other assets
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of course recessions and occasional
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depressions can reduce the value of such
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assets but over the long haul the value
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of almost all wealth increases
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[Music]
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next personal wealth comes from two
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sources
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the first source is the income you earn
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but don't spend that's your savings when
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you invest those savings in stocks bonds
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or real property or other assets you
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create your personal wealth which as
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we've seen grows over time
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the second source of personal wealth is
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whatever is handed down to you from your
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parents grandparents and maybe even
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generations before them in other words
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what you inherit
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[Music]
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the wealth gap between the richest
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americans and everyone else is
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staggering
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in the 1970s the wealthiest one percent
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owned about 20 percent of the nation's
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total household wealth now
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they own over 35
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much of their gains over the last 40
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years have come from a dramatic increase
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in the value of shares of stock
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for example if someone invested one
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thousand dollars in 1978 in a broad
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index of stocks say the s p 500
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they would have thirty one thousand
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eight hundred twenty three dollars today
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adjusted for inflation who's benefited
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from this surge
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the richest one percent who now own half
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the entire stock market but the typical
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workers wages have barely grown most
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americans haven't earned nearly enough
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to save anything
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before the pandemic when the economy
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appeared to be doing well
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almost 80 percent were living paycheck
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to paycheck
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[Music]
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so as income inequality has widened the
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amount that the few high earning
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households save their wealth has
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continued to grow their growing wealth
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has allowed them to pass on more and
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more wealth to their heirs
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take for example the waltons the family
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behind the walmart empire which has
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seven heirs on the forbes billionaires
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list
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their children and other rich
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millennials will soon consolidate even
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more of the nation's wealth america is
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now on the cusp of the largest
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intergenerational transfer of wealth in
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history
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as wealthy boomers pass on somewhere
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between 30 to 70 trillion dollars will
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go to their children over the next three
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decades these children will be able to
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live off this wealth and then leave the
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bulk of it which will continue growing
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to their own children
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tax free
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after a few generations of this almost
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all of america's wealth could be in the
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hands of a few thousand families
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[Music]
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concentrated wealth is already
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endangering our democracy
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wealth doesn't just beget more wealth it
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begets more power
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dynastic wealth concentrates power in
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the hands of fewer and fewer people who
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can choose what non-profits and
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charities to support and which
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politicians to bankroll this gives an
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unelected elite enormous way over both
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our economy and our democracy we might
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come to resemble the kind of dynasties
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common to european aristocracies in the
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17th 18th and 19th centuries
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dynastic wealth makes a mockery of the
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idea that america is a meritocracy where
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anyone can make it on the basis of their
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own efforts
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it also runs counter to the basic
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economic ideas that people earn what
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they're worth in the markets and that
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economic gains should go to those who
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deserve them
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finally wealth concentration magnifies
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gender and race disparities because
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women and people of color tend to make
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less save less and inherit less
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the typical single woman owns only 32
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cents of wealth for every dollar of
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wealth owned by a man
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the pandemic likely increased this gap
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the racial wealth gap is even starker
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the typical black household owns just 13
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cents of wealth for every dollar of
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wealth owned by the typical white
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household the pandemic likely increased
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this gap too
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in all these ways dynastic wealth
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creates a
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self-perpetuating aristocracy that runs
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counter to the ideals we claim to live
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by
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[Music]
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the last time america faced anything
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comparable to the concentration of
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wealth we face today was at the turn of
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the 20th century
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that was when president teddy roosevelt
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warned that quote a small class of
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enormously wealthy and economically
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powerful men whose chief object is to
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hold and increase their power unquote
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could destroy american democracy
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roosevelt's answer then was to tax
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wealth
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congress enacted two kinds of wealth
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taxes the first in 1916 was the estate
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tax
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a tax on the wealth someone has
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accumulated during their lifetime paid
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by the heirs who inherit that wealth
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the second tax on wealth enacted in 1922
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was a capital gains tax attacks on the
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increased value of those assets paid
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when those assets are sold
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[Music]
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but both of these wealth taxes have
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shrunk since then or become so riddled
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with loopholes that they haven't been
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able to prevent a new american
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aristocracy from emerging
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the trump republican tax cut enabled
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individuals to exclude
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11.18 million dollars from their estate
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taxes that means one couple can pass on
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more than 22 million dollars to their
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kids tax free
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not to mention the very rich often find
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ways around this tax entirely as trump's
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former white house national economic
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council director gary cohn put it only
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morons pay the estate tax
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what about capital gains on the soaring
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values of wealthy people stocks bonds
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mansions and works of art
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here the biggest loophole is something
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called the stepped up basis
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if the wealthy hold on to their assets
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until they die
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their heirs inherit them without paying
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any capital gains taxes whatsoever
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all the increased value of those assets
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is simply erased for tax purposes
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this loophole saves heirs an estimated
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40 billion dollars a year
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this means that huge accumulations of
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wealth in the hands of a relatively few
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households can be passed from generation
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to generation untaxed
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growing along the way generating
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comfortable incomes for rich descendants
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who will never have to work a day of
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their lives
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that's the dynastic class we're creating
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right now
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[Music]
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why have these two wealth taxes eroded
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because as america's wealth has
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concentrated in fewer and fewer hands
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the wealthy have more capacity to donate
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to political campaigns
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and public relations and they've used
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that political power to reduce their
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taxes it's exactly what teddy roosevelt
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feared so many years ago
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so what do we do
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follow the wisdom of teddy roosevelt and
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tax great accumulations of wealth the
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ultra rich have benefited from the
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american system from laws that protect
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their wealth and our economy that
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enabled them to build their fortunes in
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the first place they should pay their
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fair share
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the majority of americans both democrats
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and republicans believe the ultra-rich
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should pay higher taxes there are many
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ways to make them do so closing the
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stepped-up basis loophole raising the
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capital gains tax and fully funding the
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internal revenue service so it can
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properly audit the wealthiest taxpayers
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for starters
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beyond those fixes we need a new wealth
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tax
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a tax of just 2
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a year on wealth in excess of a million
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dollars it's hardly a drop in the bucket
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for center billionaires like jeff bezos
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and elon musk but it would generate
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plenty of revenue to invest in health
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care and education
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so that millions of americans have a
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fair shot at making it
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one of the most important things you as
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an individual can do is take the time to
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understand the realities of wealth
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inequality in america and how the system
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has become rigged in favor of those at
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the top and demand your political
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representatives take action to unrig it
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wealth inequality is worse than it has
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been in a century
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we have to stop this vicious cycle
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and demand an economy that works for the
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many not one that concentrates more and
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more wealth in the hands of a privileged
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few
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[Music]
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