WASHINGTON, D.C. – A new report on America’s 50 wealthiest dynastic families from the Institute for Policy Studies (IPS) finds that two-fifths of the many private foundations managed by the families failed to meet the five percent annual payout rate required by law.
The report, “Silver Spoon Oligarchs: How America’s 50 Largest Inherited-Wealth Dynasties Accelerate Inequality,” examined 248 private foundations of the 50 wealthiest families, housing more than $51 billion in assets in 2018, and found that 98 of them paid out at rates below five percent.
IPS researchers also found that the median rate of payouts by the foundations was a penny-pinching 5.7 percent – just barely above the minimum mandated by charitable giving laws. The report contains a table of the total assets and payout rates of the private foundations of the 50 families in the Data Appendix. Payout rates were calculated by IPS using 990PF IRS tax return data for foundations set up or managed by family members as reported in WealthX. IPS divided Qualifying Charitable Distributions by Net Assets to find payout rates.
“The 50 wealthiest dynastic families in the country warehouse substantial wealth in their private foundations, treating the mandated minimum payout as a ceiling or ignoring it altogether,” said Chuck Collins, co-author of the report and author of the new book, The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions. “What is the purpose of these charities?”
“Contrast this with MacKenzie Scott, who is disrupting the traditional billionaire philanthropy practice by not creating permanent private foundations that will exist for generations. She’s clearly not intending to build a wealth dynasty,” said Collins.
IPS researchers focused on America’s wealthiest families to examine how fast they are accumulating wealth and power and how they are using that wealth and power, politically and philanthropically.
While many of the foundations examined move much-needed revenue to broader public interest charities, others fund groups working to reduce taxes on the wealthy and roll back regulations that constrain corporate profits. Some funnel millions to donor-advised funds, which can fund dark-money political advocacy. And in a few cases, family members have used them to compensate themselves.
The report found that the Waltons, Marshalls, and Mellons have used their foundations to fund nonprofit public policy organizations advocating for reducing taxes on the wealthy, as well as rolling back the corporate taxes and environmental regulations that constrain the profits of their family businesses. Some, such as the Kochs and Mellons, use their foundations to funnel millions to donor-advised funds: charitable giving vehicles with no payout requirement and little transparency that can be used to fund anonymous gifts to charities doing political advocacy work. And in a handful of cases, family members sitting on the boards of their own foundations have also elected to use foundation assets to compensate themselves and their relatives for their board service. In perhaps the most egregious example of this, Éleuthère du Pont II receives more than $390,000 each year in total compensation from his family’s Longwood Foundation, where he serves as president.
The report also notes that, in what it suggests may be indicative of an “instinct for revenue preservation,” among all the billionaire descendants of dynastically wealthy families, only four have taken the Gates-Buffett Giving Pledge to give away half of their wealth: Charles Butt, Duncan MacMillan (with his wife Nancy), Richard Marriott (with his wife Nancy), and the late David Rockefeller.
The report tracked the 50 families from 1983 to 2020 using data from Forbes. It found that by 2020, the 50 families had amassed $1.2 trillion in assets. For the 27 families on the Forbes 400 list in 1983, their combined wealth had grown by 1,007 percent and for the five wealthiest dynastic families, their wealth increased by a median 2,484 percent during 37 years. The Walton family led the pack with an increase of 4,320 percent, while the Mars candy family saw its wealth increase 3,517 percent.
The report profiles all of the 50 families, including the Waltons, the Kochs, the Mars family, and many others, some well-known and some relatively unknown. The report explains the dangers from the extreme consolidation of dynastic wealth and power with sections such as:
- The dangers of dynastic wealth accumulation
- Immense and tenacious fortunes
- The political power of wealth dynasties
- Philanthropy as an extension of dynastic power
- The dynasties that might have been
A section of the report entitled The Six Habits of Highly-Entrenched Dynasties details how family dynasties hoard and protect their fortunes from taxes, as follows:
- Defeat any attempt to raise taxes on the wealthy
- Don’t give away too much to charity
- Form a family office to sequester wealth
- Create dynasty trusts and other loopholes to avoid estate and gift taxation (See the IPS Briefing Paper: “Dynasty Trusts: How the Wealthy Shield Trillions from Taxation Onshore.”)
- Use your wealth to promote self-serving public policy
- Weaponize your charitable giving to advance your dynastic interests
Solutions to the consolidated wealth and power examined in the report include:
- Existing Proposals:
- Greater oversight and enforcement by the IRS
- Emergency pandemic wealth tax
- Annual wealth tax
- Millionaire surtax
- Progressive estate tax
- Inheritance tax on heirs
- State level estate and wealth taxes
- New Proposals in the Report:
- Establish a federal rule against perpetuities
- Outlaw certain types of trusts
- Step up administrative actions by the executive branch
This report follows regular analyses from IPS on billionaire wealth gains during the pandemic, CEO pay, philanthropic giving and the racial wealth divide. In addition, recent reports have covered billionaire landlords and billionaire owners of companies with essential workers during the pandemic.
The Institute for Policy Studies is a multi-issue research center that has conducted ground-breaking research on inequality for more than 20 years. The IPS Program on Inequality and the Common Good, and the Inequality.org website, provide research, advocacy and policy development on issues related to economic inequality.