WHEN did “billionaire” become a dirty word?
Maybe it was when former Starbucks chief executive Howard Schultz dismissed Massachusetts Sen Elizabeth Warren’s proposal for higher taxes on fortunes of USD50 million or higher as “ridiculous.”
Or when an audience at the World Economic Forum in Davos, Switzerland, laughed out loud at the suggestion that the super-rich should contribute more.
Or perhaps it was during the government shutdown, when Commerce Secretary Wilbur Ross was baffled when federal workers went to food banks to feed their families.
“I know they are, and I don’t understand why,” he said in a CNBC interview. Ross, a self-proclaimed billionaire and buddy of President Donald Trump, suggested furloughed workers take out short-term loans instead.
Or maybe it was when Dan Riffle, an aide to Rep Alexandria Ocasio-Cortez, coined a new progressive slogan: “Every billionaire is a policy failure.”
Schultz, who is worth an estimated USD3.5 billion, told an interviewer that he doesn’t like being called a billionaire. These days, he prefers “a person of means” because billionaires have become shorthand for income inequality, tax cuts and special interests. Toying with a run for president, Schultz bills himself as a centrist alternative to liberal candidates such as Warren – and mocks her tax plan as unrealistic and unpatriotic.
“It’s so un-American to think that way,” he said with all the nuance and self-awareness of a man unaccustomed to either.
But Howard – can we call you Howard? – here’s the thing: Americans are starting to “think that way.” They’re starting to think that maybe it’s undemocratic for the richest one per cent in this country to control 40 per cent of the nation’s wealth. In the 1950s, the average chief executive made 20 times more than their employees; now, chief executives earn 361 times more – about USD13 million per year at the country’s top corporations.
Those 2017 tax cuts? The primary benefits went to those who were already rich.
All this comes into sharper relief during tax season, when the average worker is crunching numbers and calculating how much of their annual income goes to the government. A new Politico poll shows 76 per cent of registered voters – both Democrats and Republicans – think the wealthiest Americans should pay more.
This isn’t about blaming any specific billionaire, but a growing resentment that the richest people and corporations have somehow managed to get richer while most working stiffs are just one or two missed paycheques away from a food bank. It’s not a debate about marginal tax rates or the unregulated free market: It’s a gut feeling that the game is rigged, and the middle class and the poor are losing. The average American family can barely afford to send their kid to any college, much less bribe their way into an elite university.
“I don’t think it really makes a big difference to someone in a steel plant whether Bill Gates is worth USD10 billion or USD20 billion,” said financial writer Roger Lowenstein.
“It makes a lot of difference to him whether he’s making USD40,000 with a good retirement plan and a good health-care plan or whether he’s making USD60,000. And those types of jobs aren’t paying as well as they used to.”
For the record, estimates are that Bill Gates is worth USD97 billion. Almost a third of the world’s billionaires are Americans, including the world’s richest man (and owner of The Washington Post) Jeffrey Bezos, who’s worth an estimated USD131 billion.
And so the question of the moment – actually, of the 2020 election cycle – is this: Are billionaires contributing their fair share?
There was no federal income tax in the United States (US) until 1913, almost two decades after Congress first passed a two per cent income tax on the wealthiest citizens to curb the influence of big money in politics during America’s first Gilded Age. That tax was struck down in the courts, and it took a constitutional amendment to finally enact it.
A century later, leaders of the second Gilded Age are equally resistant to higher taxes, arguing that chief executives are better suited to solve America’s problems than politicians.
During a panel on inequality at Davos this year, businessman Michael Dell (worth an estimated USD26 billion) was asked what he thought about Ocasio-Cortez’s idea of a 70 per cent tax on any income over USD10 million.
The room erupted in laughter, knowing exactly what was coming.
“Wow, what a great question!” said Dell, shifting in his seat. The billionaire explained he felt “much more comfortable” donating millions through his private foundation “than giving them to the government. So, no, I’m not supportive of that,” he said confidently. “And I don’t think it will help the growth of the US economy. Name a country where that’s worked. Ever.”
“The United States,” answered Erik Brynjolfsson, head of MIT’s Initiative on the Digital Economy.
What’s interesting, aside from the question of whether Dell’s personal comfort should factor into the tax code, was that he was unaware that from 1932 and 1981 the top tax rate in this country never fell below 63 per cent and rose as high as 92 per cent. It wasn’t until the election of Ronald Reagan that top tax rates dropped from 70 per cent to 28 per cent.
“For the last 40 years we have been living under a market fundamentalist ideology that you could trace to the Reagan-Thatcher revolution,” explains AnandGiridharadas, a progressive commentator and author of “Winners Take All.” He describes the basic tenets of that ideology: Government is bad, taxes are bad, regulation is bad – but rich people are not only good but will make the world a better place.
“We now know that this kind of winners-take-all philosophy allows the very fortunate, through rigging political power to assist their economic power, to basically monopolise the future itself,” he says. “I think people are well aware that there are some people who’ve managed to get themselves on the right side of every (political) change. And most people haven’t.”
And yet billionaires, for the most part, have evaded criticism by branding themselves as great innovators, personifying the American ideals of rags-to-riches opportunity and hard work. (“If we did it, you can do it, too!”)
The 2008 recession challenged that narrative: An estimated seven to 10 million Americans lost their homes; eight million lost their jobs, and the average household lost a third of its net worth. Big banks got bailouts; homeowners didn’t. Only one banker went to jail and Wall Street went back to business as usual, handing out millions in bonuses the following year.
The outrage bubbled up in 2011, when Occupy Wall Street took over New York City’s Zuccotti Park and camped out in other cities around the country. The protests made headlines with a message of economic inequality and corporate influence with the slogan “We are the 99 per cent.”
Did anything really change? Not really. The only lasting legacy of the movement is the term “the one per cent.”
Then came Donald Trump, the populist billionaire who tapped into the grass-roots resentment of those left behind. Trump promised to restore their jobs and their dignity using his skills as a successful businessman and negotiator, said Giridharadas. To liberals critical of the president, he “literally became the definition of the elite charade of changing the world. He became the rich guy who says he’s fighting for the forgotten man while enriching himself. Win-win.”
Trump’s USD1.5 trillion tax cut package was passed in 2017, with lavish assurances the cut would boost economic growth for everybody. But the bulk of the benefits went to corporations and the richest Americans – who already have complicated portfolios of investments and deductions – not to average Americans.
In 2017, the median household income was USD61,858. According to last year’s Report on the Economic Well-Being of US Households by the Federal Reserve, 40 per cent of adults said that they would not be able to pay for an unexpected expense of USD400 without borrowing money, and 25 per cent say they have no retirement savings or pension at all.
“I don’t begrudge anybody making a million or hundreds of millions of dollars. I really don’t,” Joe Biden said last month. “But I do think there’s some shared responsibility and it’s not being shared fairly for hard-working, middle-class and working-class people.”
It’s fair to say no one likes paying taxes. Mark Zuckerberg (worth estimated at USD62 billion) and his fellow billionaires point to their personal philanthropy, which is all well and good but not a substitute to paying into a system for public schools, infrastructure, courts, military and public health.
What’s fair? Blackstone’s co-founder Stephen Schwarzman was paid USD786 million in 2017, adding to his net worth of almost USD13 billion. He will not pay income taxes on the majority of those earnings, thanks to tax laws, deferments and other loopholes.
We don’t know how much President Trump has paid in taxes over the years, given that he has yet to release his tax records. When Hillary Clinton attacked him for paying zero federal income tax. Trump was unfazed: “That makes me smart,” he bragged.
That sentiment – billionaires are smart and know how to work the system, the rest of us are chumps – has sparked a new grass-roots movement for the rich to pay more. Warren’s two per cent “wealth tax” targets people with a net worth of USD50 million; those with USD1 billion or more would be taxed three per cent.
“The top 0.1% of Americans own almost as much wealth as the bottom 90%, and the 400 richest Americans own more wealth than all black households and a quarter of Latino households combined,” she says. “I’ve been talking about this extreme concentration of wealth for a long time.”
But – and you’ll be shocked, shocked – the richest Americans have not been enthusiastic about her proposal.
In a podcast last month, Gates said that politicians were “missing the picture” because most of the rich get their money from investments, which are taxed at a lower rate. That’s why Warren Buffett (worth an estimated USD82 billion) famously says he pays a lower tax rate on his investment income than his secretary pays on her salary (earned income.)
Two weeks ago, Buffett told CNBC’s “Squawk Box” that “the wealthy are definitely undertaxed relative to the general population” but fundamentally, he doesn’t want to change economic policies that worked so well for so many years: “I don’t want to do anything to the goose that lays the golden eggs.” – Photo and text by The Washington Post