Should Billionaires Even Exist?

You know what’s not cool anymore? Billionaires.

Their very existence is now the subject of political debate, sparked most recently by tax-the-rich proposals from two prominent politicians.

Sen. Elizabeth Warren (D-Mass.) proposed placing a 2 percent tax on wealth over $50 million and 3 percent on assets over $1 billion. Rep. Alexandria Ocasio-Cortez (D-N.Y.) said she wants to increase the marginal tax rate on those earning more than $10 million a year.

Their ideas went viral, starting a mainstream conversation about inequality and wealth.

This kind of talk has always existed among a certain group of hard-core progressives and left-leaning economists, but heading into next year’s presidential election, the idea that the super-rich should pay their fair share is gaining real momentum.

Marshall Steinbaum, a research director at the left-leaning Roosevelt Institute, has advocated taxing the rich at higher rates for years. “We do not need billionaires,” Steinbaum told HuffPost. “The economy’s done better without billionaires in the past.”  

For Steinbaum, higher taxes on the wealthy would mean freeing up more money for everyone else. If you think of the economy as a pie, right now, billionaires are getting just about all of it, while we’re all left splitting just one slice.

If you raise taxes on the richest, their incentive to grab at every morsel declines. The theory is they’ll fight a little less hard to depress everyone else’s wages if they know that every extra million is going to get taxed away. A high-paid CEO has less incentive to keep workers’ wages low so he can get a bigger payday. 

Billionaires were once a rare breed. In the past few decades, as the U.S. has slashed tax rates, their numbers have exploded, far outpacing inflation.

Since 2008, the number of billionaires in the world has doubled, according to a report published last week by the anti-poverty nonprofit Oxfam . In just the last year, billionaires raked in an astonishing $2.5 billion each day.

In 1982, the first year Forbes debuted its list of the 400 richest Americans, there were about a dozen billionaires. The richest man in the U.S. back then was an 85-year-old shipping magnate with an estimated worth of $2 billion, or $5.2 billion in today’s dollars.

Nowadays, Forbes’ list is entirely billionaires. The richest is Amazon founder Jeff Bezos, worth $160 billion. 

Of course, rich people are, with a few exceptions, freaking out over the idea that their taxes might go up. The Wall Street Journal  editorial page is in full panic mode and Rush Limbaugh is trotting out the Hitler comparisons.

Billionaire presidential hopeful Howard Schultz, the former Starbucks CEO, is so panicked about higher taxes on the rich that he decided to abandon the Democratic Party and run as an independent, he said in an interview with CNBC .

Schultz clocks in at No. 280 on Forbes’ list with a net worth of $3.4 billion. He grew up in a public housing development. The fact that one of the nation’s most successful men started out living in government-supported housing is but a tiny example of how taxes can help those at the bottom rise to the top. Without that kind of support, many successful Americans would be toiling away, minus their fortunes.

There is a raft of policies in place that help America crank out billionaires: lax antitrust laws and regulations; strong intellectual property protections; low tax rates; government-funded research. Microsoft co-founder Bill Gates (No. 2 on Forbes’ list in 2018) couldn’t have amassed a fortune, for example, without strict copyright and patent protections on his software, Steinbaum pointed out.

The late Steve Jobs, widely regarded as an absolute genius who deserved every last dollar, used a boatload of government-funded technology to help create his defining device, the iPhone. Google also benefited from government-funded research, argues Mariana Mazzucato in a piece in the Harvard Business Review.

“Over the years. U.S. taxpayers have been very good to Apple,” she writes, adding that in return, the Cupertino, California, computer maker and other tech companies have done everything they can to get out of paying taxes and paying it forward.

Most entrepreneurs like to argue that they’ve achieved great wealth in spite of the government, not with its help.

There are exceptions. Warren Buffet famously wrote about his light tax burden, as compared to his secretary, for example.

Chris Sacca, a retired venture capitalist estimated to be worth about $1 billion and known for his early investments in Twitter and Uber, tweeted his tentative support for Warren’s wealth tax last week. “Very lucky guy here (who got rich in part thanks to public schools, access to health care, etc.), weighing in to say that @ewarren ’s proposal to put a 2-3% annual tax on wealth over $50 million is *extremely* and *radically*... reasonable.”

When asked by HuffPost to elaborate, Sacca was careful not to embrace Warren’s proposal.

“Too many Americans are working their asses off yet struggling to make ends meet. The social safety net is slipping away, and with it, many people’s shot at the American dream,” Sacca said. “Senator Warren’s proposal would be hard to define and implement, and there are intriguing alternatives. I’m not endorsing her specific approach as much as I am the need for all of us to talk about this stuff. We all need to have a reasonable and productive conversation about the best ways the privilege of some can ensure life, liberty, and the pursuit of happiness for all.”

Schultz, meanwhile, has called criticism of a system that creates billionaires “so un-American.”

For a long time, however, the idea that a handful of plutocrats would control most of the wealth in the United States was itself seen as deeply un-American, said Steinbaum, the research director.

In the beginning, of course, the U.S. was a nation in which dynastic wealth was something to rebel against. The ethos that the rich should only get so rich was baked into our tax code beginning in the 20th century. Indeed, from 1936-1980 , the top tax rate never dipped below 70 percent.

The idea that paying taxes was a civic good started to sour in the 1980s during the Reagan years, but it wasn’t until the 1990s that billionaires got a rethink.

Thank the tech boom. In the 1990s, tech billionaires became fetish objects. Khaki-wearing “geniuses” like Gates were worshipped in places like Fast Company magazine.

“The ’90s were a time when people were cheering for billionaires, and I thought that was such a strange thing to do,” said Thomas Frank, a political analyst, historian and author of Pity the Billionaire.

“Having billionaires became an end in itself,” Frank said. “It was so obviously wrongheaded.”

Rich tech bros even got a pass in the wake of the Great Recession when bankers became reviled. It’s hard to remember now, but once upon a time, Facebook founder Mark Zuckerberg was thought to be a wunderkind, here to change the world.

Times changed.

“Should we even have billionaires?” is the defining question of 2019, said Anand Giridharadas, the author of Winners Take All, a scathing critique of the plutocrat class’s largely empty efforts to “change the world” published last year.

“No one makes a billion dollars. You TAKE a billion dollars,” economist Stephanie Kelton, a former advisor to Bernie Sanders, tweeted last week.

“You plunder it from the environment ...You strip it using patent protections,” she wrote, referencing the many ways the U.S. enables and supports people IP protections, lax regulation, low taxes, weak labor protections in amassing obscene amounts of wealth.

Ocasio-Cortez made the same point recently in an interview: Every billionaire is a “policy failure,” she said.