Column: America is falling out of love with billionaires, and it’s about time
Our emerging political debate over taxing the rich seems to be getting bogged down in details — how high a tax rate, should we tax income or wealth, etc., etc. But this fixation on nuts and bolts is obscuring what may be the most important aspect of the discussion: America is becoming fed up with its billionaires.
That sentiment is long overdue. It has begun to surface in the suggestion by Rep. Alexandria Ocasio-Cortez that the top marginal rate on high incomes shift back to what it was in the 1950s or 1960s, and in Sen. Elizabeth Warren’s proposal for a wealth tax on those with high net worth.
Since the Reagan administration, the political establishment has strived to convince Americans that extreme wealth in the hands of a small number of plutocrats is good for everyone. We’ve had the “trickle-down” theory, the rechristening of the wealthy as “job creators” and their categorization invariably as “self-made.” We’ve been told, via the simplistic Laffer Curve, that if you raise the tax rate you get less revenue.
The love of money as a possession ... [is] a somewhat disgusting morbidity, one of those semicriminal, semi-pathological propensities.
— John Maynard Keynes (1928)
There are three main subtexts of these arguments, all of which show up in the email in-box whenever I write about wealth and taxation. First: The extreme wealth of the few creates wealth all along the income scale, for the masses. Second: It’s immoral — confiscatory — to soak the rich via taxation, at least above a certain level that never seems to be precisely defined. And third: If we torment the wealthy with taxes, they’ll pack up their wealth and leave us, whether for some more accommodating nation on Earth or some Ayn Randian paradise.
Experience has shown us that the first argument is simply untrue — extreme wealth begets only more inequality. The second argument raises the question of where reasonable taxation turns into confiscation, although the level of taxation of high incomes today is nowhere near as high as it was in the 1940s, 1950s and 1960s, when economic gains were shared much more equally with the working class. As for the third, Warren’s answers to capital flight include stepping up IRS enforcement resources, which have been eviscerated by political agents of the wealthy, and imposing an “exit tax” on any plutocrat renouncing his or her U.S. citizenship to evade U.S. taxes.
Why are billionaires beginning to be treated so skeptically?
One reason surely is the evidence that extreme wealth has a corrosive effect on the economy. Wealth inequality places immense resources in the hands of people unable to spend it productively, and keeps it out of the hands of those who would put it to use instantly, whether on staples or creature comforts that should be within the reach of everyone living in the richest country on Earth.
Examples have been proliferating of the inability of the super-rich to spend their money productively or for the common good. Last week it was reported that Daniel Snyder, the owner of the NFL’s Washington Redskins, was spending $100 million on a 305-foot super-yacht complete with an on-board IMAX screening room. It’s his second yacht, after a 220-foot version.
At the same moment, hedge fund owner Ken Griffin was disclosed as the buyer of the most expensive home in America, a $238-million Manhattan penthouse. According to Bloomberg, he already owns two floors of the Waldorf Astoria hotel in Chicago ($30 million), a Miami Beach penthouse ($60 million), another Chicago penthouse ($58.75 million) and another apartment in Manhattan ($40 million).
Griffin, to be fair, also deploys some of his wealth philanthropically. But that only raises the question of why that sort of spending should go to the recipients personally favored by a billionaire, even with the best intentions.
Computer entrepreneur Dell unwittingly raised exactly this question during a panel discussion at the recent financial powwow in Davos, Switzerland, where he dismissed calls for higher taxes on the super-wealthy by declaring that he contributed to society via a family foundation. “I feel much more comfortable with our ability as a private foundation to allocate those funds,” he said, “than I do giving them to the government.”
Dell’s family foundation does good work, but so do government programs devoted to feeding the poor, educating children at all income levels, and eradicating disease. Why should those efforts be entrusted to a private family, rather than to the community at large via its elected officials?
In the same vein, Dr. Patrick Soon-Shiong, a billionaire, has put some of his wealth toward the laudable goal of invigorating the Los Angeles Times. But that doesn’t answer the question of how or how much he, or Dell, should be taxed.
The issue of how many billions are too many billions has been placed in high relief by the presidential campaign of Schultz, the ultimate billionaire vanity project. Schultz condemns calls for higher marginal tax rates on the wealthy and, typically for his species, portrays himself as a man who has gotten where he is today by taking advantage of America as the land of opportunity — so what’s keeping you layabouts from doing the same? But he also mentions, in passing, that he grew up in federally subsidized housing in New York. So someone, somehow, gave him a leg up using tax revenue.
It’s proper to question why people like Schultz and Dell feel so strongly about a marginally higher tax on their marginal income.
People like Schultz “live what is, for almost all practical purposes, a post-scarcity existence,” Paul Campos observes aptly at the Lawyers, Guns & Money blog. “If you have three billion dollars, then you can buy almost anything without even bothering to consider what it costs, since what it costs is, to you, practically indistinguishable from ‘nothing.’ Given that everything is for you already basically free, why would you even care if your tax bill goes up? Especially given that you live in a society in which, despite what is by ... historical standards an almost inconceivable amount of total social wealth, lots of people still have to worry about getting enough to eat, not freezing to death in the next polar vortex, etc?”
Keynes today is treated as an icon of liberal economics, but he was a capitalist through and through. His theme here was that the accumulation and investment of capital had created a world in which the economic struggle — the “struggle for subsistence” — would be won within 100 years.
That brought Keynes to a critique of “the money motive.” He looked ahead to a world in which “the accumulation of wealth is no longer of high social importance” and society could rid itself of “many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues.”
Chief among these was “the love of money as a possession — as distinguished from the love of money as a means to the enjoyments and realities of life.” The pursuit of excess wealth, he projected, “will be recognised for what it is, a somewhat disgusting morbidity, one of those semicriminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease.”
Keynes wrote in an economic environment that should sound familiar: “We are suffering,” he observed, “from the growing pains of over-rapid changes. ... The increase of technical efficiency has been taking place faster than we can deal with the problem of labour absorption; the improvement in the standard of life has been a little too quick.”
He warned of the pessimism born of “the enormous anomaly of unemployment in a world full of wants,” and of the forces that created head winds against peaceful change: “The pessimism of the revolutionaries who think that things are so bad that nothing can save us but violent change, and the pessimism of the reactionaries who consider the balance of our economic and social life so precarious that we must risk no experiments.”
We are almost at Keynes’ 100-year deadline. He was half right. We have the resources at hand to win the “struggle for subsistence.” But we haven’t come full circle to regarding the love of money as a pathological, “somewhat disgusting morbidity.”
We may be getting there, however. Ocasio-Cortez and Warren have shown that casting a critical eye on accumulated wealth can garner public approval. Schultz’s campaign, based as it is on a quest to keep the wealth he has, is collecting brickbats and ridicule. The process is only beginning, but it’s desperately needed.