The billionaire class in the United States is in a state of agitation and well it should be. The ultra-wealthy are coming under scrutiny like rarely before. Their free ride is coming to a close.
The campaign by liberal populists to dramatically reduce and redistribute their gargantuan fortunes through a stiff wealth tax is gaining traction. Polls show even a majority of Republicans support the move.
The rich are trying to fight back. More than a dozen of them have spoken out against the radical tax plans. Billionaire hedge fund manager Leon Cooperman, as if staring into the abyss, got all teary-eyed in a recent television interview, castigating the tax grabbers for “vilifying” the rich.
But sympathy for the money moguls is in short supply. That their treasure chests could be reduced to a couple of billion hardly leaves the American multitudes furrowing their brows in wonderment as to how the poor fellows will make ends meet.
Leading the anti-billionaire crusade are the two tenacious leftist senators, the shrill Elizabeth Warren and the shriller Bernie Sanders. They occupy two of the leading three spots in the Democratic race for the presidential nomination.
Their prospects may just have been given a nice boost by the signal from billionaire Michael Bloomberg that he is about to enter the race. Mr. Bloomberg is a moderate. Analysts say he is very likely to siphon off support from the centrist best placed to beat the radical candidates, Joe Biden.
Whatever the outcome, the Democratic campaign is raising the level of public consciousness as to how warped income distribution is in the country. With the richest 400 Americans controlling more wealth than the bottom 60 per cent, it’s the worst since the 1920s.
Some billionaires give back so much that criticism of them is unjustified. Over all however, statistics show that poor and middle-class Americans give a higher percentage of their income to charity than the ultra-rich do.
While the over-concentration of political power has been much debated, the power of the economic behemoths has not. Big tech giants such as Amazon and Facebook and Google are now targets. The U.S. gained 19 new tech billionaires just last year.
Defenders say the rich have played by the rules of the free-market system fair and square and have legitimately profited.
But critics such as Robert Reich, who was labour secretary in the Clinton administration, contend that this is so much hogwash.
He notes how Jamie Dimon, CEO of JPMorgan Chase, would not be worth the US$1.6-billion he is today were it not for the 2008 government bailout of JPMorgan and other major Wall Street banks because they were considered “too big to fail.”
Amazon’s Jeff Bezos, he adds, would be worth far less if the government enforced anti-monopoly laws and didn’t grant Amazon such broad patents. Koch Industries is flush in part because it has benefited from a corrupted system which makes it so easy to secure favours from politicians. The Kochs did so with oodles in donation monies and millions in lobbying efforts to get the Trump tax cut. It saves the company more than US$1-billion a year.
Then there are the lax tax laws such as the minimal estate tax. Economist Thomas Piketty estimates that 60 per cent of all the wealth in America today is inherited.
Mr. Sanders believes billionaires should not even exist. But by lumping them all together, he misfires. Billionaires such as Bill Gates and Michael Bloomberg are generally lauded for their generosity and contributions to society. Mr. Gates pays billions in taxes, gives vast amounts to charity, has distributed US$36-billion to reduce the impact of polio, HIV and malaria.
Making a heavily punitive wealth tax work will be a challenge. The record in Europe is negative. For various reasons, wealth taxes have been scrapped in France, Germany and Sweden. In some cases, the taxes led to flights of capital, a problem which Ms. Warren says she will counter through a huge exit tax on anyone renouncing U.S. citizenship.
She is a relentless force who could well capture the zeitgeist. The absurdity of having such a mass of the country’s wealth concentrated in a minuscule number of hands has never been so blatantly evident.
Attempts at limiting the concentration of wealth have been around since the days of trust-buster Teddy Roosevelt. Rarely has the opportunity for remedy been better than now.
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