NCPA - National Center for Policy Analysis

NCPA Study: Inheritance Has Little To Do With Wealth

June 27, 2000

As Congress is debating whether to abolish the estate tax, a new study from the National Center for Policy Analysis (NCPA) finds that inheritance is not a significant source of wealth. According to the study by former Treasury official and NCPA Senior Fellow Bruce Bartlett, a significant percentage of the largest American fortunes were accumulated in a single generation.

  • Some 80 percent of millionaires acquire their wealth in a single generation without the benefit of inheritance.
  • Among the top 5 percent of households ranked by wealth, only 8 percent of their wealth came from inheritances.

Furthermore, the U.S. has a very high level of wealth mobility, with poor people becoming rich and rich becoming poor in a short period of time. Wealth is far more mobile in the U.S. than in Europe, and it is distributed more equally than in the rest of the world.

  • Over a ten year period, 60 percent of families in the bottom ten percent of wealth distribution had moved up to a higher tenth -- and some all the way up to the top 10 percent.
  • Conversely, almost half of those in the top ten percent of wealth had dropped out of that tier after 10 years.
Partly due to the ability of the very wealthy to avoid the estate tax through estate planning, more than 50 percent of all estate tax revenue in 1997 came from estates under $5 million. In fact, the tax takes a smaller share of estates above $20 million than of estates below $5 million.

Source: Bruce Bartlett (NCPA senior fellow), " Wealth, Mobility, Inheritance and the Estate Tax," NCPA Policy Study No. 235, June 26, 2000, National Center for Policy Analysis.

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