“You all just got a lot richer.”
Donald Trump to a gathering of his rich friends at Mar-a-Lago on 12/22/17 after his 40% corporate tax cut passed
It’s an attitude, a lack of empathy, even from those who genuinely rose from true rags to true riches. As Elon Musk approaches becoming the planet’s first trillionaire – $1,000,000,000,000, more than the gross domestic product of 198 countries – the absurdity of mega-wealth becomes patently obvious. Monarchs and dictators are wildly rich, assets and cash hidden (or at least attempted to be hidden) as best they can. The ostentation of mega-mansions – usually a multiple per billionaire – yachts, lavish jets, a horde of servicing minions, artistic treasures, jewelry, customized designer everything are everywhere they go. There’s nothing wrong with being rich and living well, particularly if an individual earned and built it themselves. But there is a limit where rich turns into waste, a burden on the rest of us, and the sign of an uncaring elite, often buying and selling politicians, living even better with political favors.
They live in a parallel universe, have a different legal system, and can even relocate to a non-extradition-treaty country where even their wealth does not buy the necessary local political result. That they make generous charitable contributions may be laudable, in part, but remember, they are picking the causes they support, with a particular proclivity to make sure the best hospitals are on that list. That ensures that the recipient medical facility will do far more than any mere mortal would expect to treat any infirmity, ailment or disease the relevant wealthy ones may suffer. Such contributions are not determined by us but by them. Their pet projects and priorities, however generous and beneficial these “gifts” might be.
That the world’s first trillionaire is likely coming from the United States should be a red flag to all of us. That “Let them eat cake” came from Marie Antoinette, and resulted in her literally losing her head, should be an admonition to rich and poor alike. As I watched the confirmation hearings from nasty Senators pounding Ketanji Brown Jackson as an elitist Harvard Law School graduate, the level of hypocrisy was alarming. Those with the most anti-elite passion were all graduates of Ivy or Ivy equivalent law schools, including Harvard, Yale and Georgetown.
The big trade-off that has allowed the Republican Party to rise has been: “give us low taxes and limited regulation and we’ll impose your evangelical values on the whole damned country!” See also my February 5th Money Talks, Wealth Screams, Special Interests Rule blog. It not a free market, no matter what anyone may tell us. It is a highly tilted playing field via laws passed specifically to favor the rich campaign contributors. Capitalism designed for the richest few.
While real estate property taxes and estate taxes are a mild exception, for most of the mega-wealthy individuals in this country – which has the widest income/wealth inequality gap in the developed world by far – pay no taxes on their accumulated assets. “Revenues” are the primary tax base. Since they buy less (as a percentage of net worth) at traditional retail than the rest of us, they pay proportionately less in sales tax too. Certainly, they pay far, far less than the rest of us based on their sizeable net worth. They can borrow against these assets, get tons of cold hard cash, but the only real tax consequence to them is an additional benefit: they can deduct the interest. Their asset appreciates, they borrow more and roll over old debts and get more tax deductions on interest paid. For a far more detailed examination of this anomaly, see my March 25th Citizens United, Loopholes and Mythology blog.
For those nations that tax wealth, indeed it has been an uphill battle. The problem often stems from setting the bar where wealth tax kicks in way too low. What is the level of net worth where taxation is justified? Would be the “deductible”? Not our farms, cry some. Why not? It’s wealth. $10 million? $50 million? $100 million? $1 billion? Bidens’s focused on the $100 million mark in a new proposal. Expect GOP squawking. Whenever you hear the words “creeping socialism,” a complete misuse of that term, picture a rich person sitting on a sky-high pile of gold ingots laughing. Writing for Capital & Main, reprinted in the March 26th FastCompany.com, Kristin Toussaint addresses this anomaly, looking first at Trump’s statement above:
“His glee was unsurprising, once again confirming who the former president thought were his most important constituents. It was also the latest example of the GOP’s insatiable desire to cut taxes for the wealthiest Americans, a movement forged in the 1970s and 1980s by California anti-tax activist Howard Jarvis and President Ronald Reagan… At the same time, a huge disparity between rich and poor continues to accelerate in California and across the country. The blatant unfairness of the federal tax code hasn’t escaped the notice of voters, who are increasingly open to the rising call for national and state wealth taxes.
“A 2020 Reuters/Ipsos poll found that 64% of Americans favor some kind of wealth tax for the super-rich, agreeing they should ‘contribute an extra share of their total wealth’ each year. That support crosses party lines, with 77% of Democrats backing the idea and 53% of Republicans… During the 2020 presidential primary season, proposals for a wealth tax from progressive senators Elizabeth Warren and Bernie Sanders were widely popular, though Joe Biden never explicitly endorsed the idea. Billionaire candidate Tom Steyer proposed a tax whereby ‘anyone worth $32 million or more’ would pay an additional 1 cent on the dollar. For those with more than $500 million, it would go to 1.5 cents; and for billionaires, an additional 2 cents for every dollar. The result would be an extra $1.7 trillion in tax revenue over a decade.
“A current proposal by Democratic Senator Ron Wyden of Oregon called the Billionaires Income Tax, would target about 700 extremely wealthy taxpayers—the top 0.0005% of Americans. It could be a crucial ingredient in funding whatever form President Biden’s Build Back Better plan takes when it reemerges this year… The federal proposals are gaining more attention as an alternative to traditional tax increases that don’t enjoy the support of Democratic moderates in the Senate, Kyrsten Sinema of Arizona and Joe Manchin of West Virginia. Biden is naturally more inclined toward simply raising corporate tax rates and taxes on wealthy individuals but now sees a wealth tax as a potential, and maybe necessary, substitute.”
Populist vitriol, brimming with anger at rich elites (why did they back Trump? A most interesting question beyond the scope of this blog), actually share this animosity with the left. For most of us in the middle, it is a problem that is beginning to demand action. Income/wealth inequality have accelerated into “way too extreme” even for most of us. The ultimate instability, the stuff of civil wars, is beginning to stir even the richest to correct an anomaly that just might cost them their heads. The explosion of gated communities over the last quarter century should tell you that this fear is pervasive among the rich. Some of these mega-wealthy are waking up.
“One especially engaged activist group is the Patriotic Millionaires, founded in 2010. With more than 200 millionaire (and billionaire) members in 31 states, their efforts began with a letter sent to then-President Obama asking that the Bush tax cuts for the wealthiest Americans be allowed to expire… ‘There are a lot of people who feel that rich real estate developers are the most important people in the universe and just should not pay any taxes and that only working people should pay taxes,’ says Morris Pearl, chair of the Patriotic Millionaires and author of last year’s Tax the Rich! How Lies, Loopholes, and Lobbyists Make the Rich Even Richer.
“A former managing director at the investment firm BlackRock, Pearl says the goals of the Patriotic Millionaires are not just idealistic but practical, and he suggests that it’s increasingly common for high earners and business owners to share this view. ‘Their investments, their businesses, depend on the fact that the United States is a country with hundreds of millions of people who can pay their bills every month,’ Pearl explains. ‘Companies make money from people paying their bills. It’s not money trickling down from the top to the less wealthy people. It’s money trickling up.’” Exactly.
I’m Peter Dekom, and how much additional danger are the mega-wealthy willing to accept to preserve their unconscionable levels of wealth?
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