Low correlation (if that’s even true) isn’t a reason not to care about wealth inequality, that’s silly. It might be a reason we should focus more on wealth inequality than income inequality, but it’s pretty naive to frame wealth as “frozen” with the only options being spend, save, or invest. The definition of capitalism is that wealth begets more wealth; capital is the fuel and the leverage to claim profits. One might call that “invest”, but that’s misleading and you’ve downplayed it. There’s a broad array of ways for the wealthy to leverage wealth in order to collect more. You can use it to start companies. You can use it to buy other people’s companies. You can borrow against it to get loans for money you can spend without paying taxes. You can influence politics and business in many ways to lean conditions to favor your own investments and thwart others. That’s just to name a few, there are lots more. Having wealth without “spending” it still buys incomes, influence, power, and more wealth.
Given that having wealth earns money and accumulates wealth faster than not having wealth, believing that multi-generational wealth is somehow frugal is pretty funny to me. Sure spending looks “frugal” when your spending is offset by a passive income, when you have so much money you can opulently buy anything you want in the world and it doesn’t even put a dent in your interest income. The mega rich sometimes put their purchases (planes, yachts, mansions) to work earning money. They have a large set of options that they use in practice for enjoying their wealth while paying dramatically lower taxes. Other words that could replace your used of frugal are ‘incentivized’, ‘unfair’, and ‘greedy’. The multi-generational billionaires certainly are not living like paupers nor pinching pennies.
Some confounding factors against comparing income inequality and wealth inequality are that rich people tend to report very low incomes, which is well known and part of the way they get around taxes. For the middle class who is not going to pass on multi-generational wealth, in countries where taxes are high and the social safety net is large, it might make sense to not accumulate. For the middle classes, income is what you care about before you retire, and wealth is what you care about after retiring. If post-retirement living is covered, and if inheritance taxes are high, it might well make the most sense to spend income & share money with family before retiring.
> ...You can borrow against it to get loans for money you can spend without paying taxes. ...
Are you assuming that loans don't need to be paid back at some point? What you're listing is ways of either investing wealth (that is, using it productively to make more wealth - which is far from easy or free of risk) or spending it down. Some ways of spending wealth down may be tax-advantaged in some locales, but this is offset by the fact that taxing income places an extra tax burden on the time-based and precautionary value of that same accumulated wealth. I.e. wealth that's being invested in a risky, long-term venture is in fact quite heavily taxed.
The rough tax avoidance strategy here is to take out loans with your assets as collateral, and keep rolling those loans forward until you die, at which point they can be paid off and then onto your heirs with relatively little tax. This doesn't give you access to all of your wealth as cash (since the collateral is risky so you need to put up some amount more than you're borrowing), but what you do get you get without paying anywhere near as much tax, the interest on such loans is very low, and you still keep control of whatever asset you're borrowing against and whatever gains/income it might produce.
> Are you assuming that loans don’t need to be paid back at some point?
No, what I said is you don’t have to pay taxes on those loans. Obviously a loan is paid back. The tax avoidance scheme here is that a loan is not income and you can use held stock (that hasn’t been taxed) as collateral for short term loans.
> this is offset by the fact that taxing income places an extra tax burden on the time-based and precautionary value of that same accumulated wealth.
Not sure what you’re referring to. Again, the mega rich often don’t have significant “incomes” from a taxation point of view, regardless of how much money they make or spend.