How Much is Enough?

I’ve blogged several times recently on how our reluctance to tax mega-wealth has caused this nation to remain the only developed country on Earth without universal healthcare, has failed to recognize that relying on new younger workers to support retired elders has been based on the false assumption (false for decades) that the younger cohort has been enough in a dramatically changed work world, required massive loan-funded tuition increases at a multiple of the rise in inflation and has resulted in the greatest income/wealth inequality in the developed world. We need an asset tax… not a simple income tax adjustment.

Our mega-rich and the legislators their wealth has “influenced” have exacerbated the disasters that climate change has wrought by protecting legacy industries pumping greenhouse gas emissions and other pollutants into our environment. We also have a federal budget deficit because those rich influencers would rather saddle every taxpayer with interest-bearing borrowings just to keep their taxes low. A reverse Robin Hood. The false mantra, a supply-side economics theory that has always proven false, that we must protect the job creators and that a rising tide floats all boats, has sunk the true earning power of average Americans to one of the lowest levels in modern history. Ask yourself who benefits the most from tax loopholes and lower tax rates. Ask yourself why we spend so much time creating tax rules that only benefit the rich.

I live in Los Angeles, a city with literally hundreds of houses valued at over $20 million. I see single family residences well over $100 million listed and selling routinely. We’re not the only US region with that reality: the Bay Area (including the Silicon Valley), Miami, Seattle, Boston, DC, etc. have a similar plague. Extravagance? According to the November 28th StratosJets.com, the US accounts for two-thirds of the private jets and turboprop aircraft in the world. Aside from the cost of such aircraft, which can be stratospheric, depending on usage, the average private such owner will face between $2 and $100 million in annual maintenance, fuel, storage, insurance and general operational costs a year. The US has over 25,000 such private enhanced aircraft; Europe comes in second.

I could delineate how the average American deals with the rising costs of food, durables, clothing, education and healthcare, but I am writing a blog, not a book. So, I have picked one segment, housing to examine how average Americans are faring. “Although rental markets are cooling, asking rents remain above pre-pandemic levels and affordability conditions are the worst on record. In 2022, the number of cost-burdened renter households [defined by HUD as spending 30% or more of their income on rent] hit a new high of 22.4 million. This marked an increase of 2 million households since 2019 and pushed up the share of cost-burdened renter households to 50 percent, a 3.5 percentage point jump in just three years…

“The number of people staying in places not intended for human habitation hit an unprecedented 256,610 people, up 48 percent since 2015. As the number of people staying in unsheltered locations rose in expensive states like California, Oregon, and Washington, traditionally more affordable states like Ohio and Tennessee also had large increases over this period.” January 25th report from the Joint Center for Housing Studies at Harvard University.

The picture for average homebuyers has also been bleak since interest rates have skyrocketed, putting more people to rent and pushing tens of thousands of people into homelessness. The National Association of Realtors explains that “the national [homebuyer affordability] index is currently below 100, which means that the typical family cannot afford to buy based on the median-priced home. An index below 100 means that a family with a median income had less than the income required to afford a median-priced home. The income required to afford a mortgage, or the qualifying income, is the amount needed so that mortgage payments on a 30-year fixed mortgage loan with a 20% down payment account for 25% of family income… the US average income to afford to buy the average US home reached a peak of $107K in 2023.”

Can we afford such wealth? With a note that “every billionaire is a policy failure,” and writing for the January 29th Los Angeles Times, Ingrid Robeyns, a professor of political philosophy at Utrecht University and the author of “Limitarianism: The Case Against Extreme Wealth,” expounds: “[We] should be morally more ambitious than only wanting to get rid of fortunes that are more than $1 billion. If we look carefully at the reasons for limiting personal wealth, we might well agree on a much lower maximum limit.

“Why should society limit extreme personal wealth?... Excess wealth keeps the poor in poverty while inequality grows. Research shows that the lion’s share of the gains that economies wield go to those who already have the most, while only a tiny fraction goes to those who have the least. This is the case globally, as well as in the U.S. Tax deductions disproportionately benefit the rich, whose tax contributions could have supported the poor… Another important reason is that excess wealth undermines democracy. As I’ve found in my research, extreme wealth allows the super-rich to spend fortunes on lobbying, or to donate huge sums to support political candidates and parties, which gives them a bigger voice in political decisions.

“Moreover, the rich and super-rich are disproportionately responsible for climate change. Their lifestyles and their investments are responsible for more greenhouse gas emissions than the average person’s. If they paid taxes for the environmental harms their activities cause, their holdings would be much smaller… A more fundamental reason to limit wealth? Although many believe that what they reap in the market is what they deserve, no one can morally say that they deserve their fortune. Wealth is, to a large extent, the result of factors that we can in no way take credit for. We should acknowledge the huge influence of good or bad luck in our lives: including the ‘natural lottery’ ticket that we were given when we were born; the family we were born into; the parents and teachers who influenced us deeply. Inheriting a vast fortune, the source of wealth for so many rich people, is also pure luck, and thus undeserved. Much economic success has been facilitated by the work and investments from previous generations, and none of us can take credit for those achievements.

“If we want to limit wealth so that we can address poverty, invest in public infrastructure, protect democracy, end climate destruction and eliminate undeserved riches, then where should we draw the line?” And no, this isn’t socialism, where government literally owns virtually all assets of value, from farmland to factories, from housing to resource extraction. And no, this isn’t about stopping people from getting truly rich. It is, however, balancing mega-wealth against bona fide social needs, political freedom and, most of all, genuine hope of our entire society.

I’m Peter Dekom, and upward mobility in this country has long since been relegated to the history books.