Tax-preferred intergenerational transfers let white wealth compound across generations

Evidence

When families have enough disposable income to purchase stock, the tax-free treatment of family financial transfers enables their children to sell the stock, keep more of their after-tax dollars, and build up their own nest egg. Both gifts and inheritances receive advantageous tax treatment; if it’s a gift, the children receive the low preferential rate on any profit above the basis. If it’s an inheritance, the basis is based on value at death, and they receive the income tax-free. Those children can use that money to pay their own children’s college tuition, enabling them to graduate debt-free. Perhaps the grandchildren will also receive assistance with a down payment on a home. That would make it more likely for them to be offered a competitive interest rate because they are white with a high down payment, compared with the subprime rates targeted to black homebuyers. That home will likely be located in a homogeneous white neighborhood, where it will grow in value much more quickly than it would in a diverse or majority-black neighborhood. Then, the cycle is poised to repeat for the next generation. — Dorothy A. Brown, The Whiteness of Wealth, 477

Categorization

• XREF: The stepped-up basis and stepped-down treatment of gifts/inheritances is a concrete named tax mechanic worth pairing with the reader’s goal of listing four specific provisions. — connects to: Clustering of multiple capital forms entrenches status inequality across generations. — W. David Marx, Status and Culture: How Our Desire for…, 90; Individual success coexists with a tax system designed for white wealth building — Dorothy A. Brown, The Whiteness of Wealth: How the Tax…, 68