The Billionaire Class Created Their Own Wealth Tax. It Failed.
In August 2010, as millions of working-class Americans saw their nest eggs destroyed in the wake of the financial crisis and subsequent foreclosure wave, 40 of the country’s wealthiest individuals and couples came together to form a compact. Within their lifetimes, these billionaires swore, they would give away more than half of their wealth. The Bush tax cuts were still a few months away from being extended, and even without that generous giveaway, America’s richest families decided to implement what was effectively a hefty wealth tax on themselves.
Led prominently by Bill and Melinda Gates and Warren Buffett, the Giving Pledge would account for many billions of dollars in redistribution. “This is about building on a wonderful tradition of philanthropy that will ultimately help the world become a much better place,” said Gates at the time.
The pledge quickly proved highly popular among the world’s rich. In 2015, Mark Zuckerberg, who became a Giving Pledge signatory five years earlier at age 26, decided to up the ante even further, vowing to give away 99 percent of his Facebook shares. Today, the pledge includes 204 of the world’s wealthiest individuals, couples, and families, ranging in age from their 30s to their 90s, spanning 30 states (plus D.C.) and 23 countries.
Yet, despite the world’s best, supposedly brightest, and definitely most well-endowed dedicating their lives to diminishing their colossal holdings, the Giving Pledge has been a near-total failure. Try as they might to spend it down, their dynastic winnings continue to swell, as favorable tax deals, loopholes, and havens have helped balloon their money to unfathomable and unspendable amounts. In the decade the billionaire class has had to effectuate its self-imposed wealth tax, none of the highest-profile signees have even managed to slow the growth rate of their wealth, let alone come anywhere close to cutting the total in half.
The problem with having billions of dollars in wealth, most of which is held in assets and investments, is that it compounds and grows exponentially. Just investing that money in the stock market would yield an annual return of 10 percent on average, and even more in recent years. Which is why all but one of the world’s 20 wealthiest tech figures have seen their net worth surge by billions of dollars in the ten months of 2019 alone, per Business Insider. And the only one who didn’t hit that growth threshold was not even a Giving Pledge signatory: It was Jeff Bezos, who shelled out a record-shattering sum in his divorce settlement and still managed to remain the world’s richest person.
It can be hard to visualize just how fast the money grows when you’re starting out with tens of billions in principal, but consider these numbers: Mark Zuckerberg’s net worth has increased by about 40 percent this year alone, dumping an additional $22.4 billion onto his personal pile in 2019, according to Bloomberg. That brought his sum total to $74 billion, despite some of the most aggressive Giving Pledge commitments of the cabal. Steve Ballmer, Bill Gates’s onetime right hand at Microsoft, has long been one of the world’s richest people. But the $53 billion he has to his name in 2019 makes him twice as rich as he was at the beginning of 2017. Even Bill Gates himself, whose reputation has been cemented around his philanthropic foundation and his creation of the pledge, gives away about $5 billion a year in grants, yet maintains a net worth that increased by $18 billion in 2019 alone.
The profound inadequacy of the Giving Pledge as a tool of wealth distribution has even been admitted by many of the signatories themselves. Telecommunications billionaire Leonard Tow recently expressed his dissatisfaction with the whole enterprise. Tow and his now-deceased wife Claire signed the pledge in September 2012 and, in an open letter to Gates at the time, wrote tellingly that they “never believed that the wealth we accumulated was truly ours.” Honored at a philanthropic ceremony last month, Tow said that he plans to give away all of his fortune with the exception of “modest provisions” for family members. He then confessed that Gates’s philanthropy pact hasn’t been “growing as rapidly as we hoped.”
The late Microsoft co-founder Paul Allen offers another lesson. In 2010, Allen took the pledge to see his wealth halved. At that time, his net worth was a paltry $13.5 billion. Immediately after he set to work giving away his money, he began trending in the exact opposite direction: Despite giving over $2 billion to charity in his lifetime (which, of course, isn’t half to begin with), Allen died last year with over $20 billion in assets. Oops.
As a matter of substance, at least some of America’s billionaire class seems to agree with Bernie Sanders and Elizabeth Warren that they are in possession of entirely too much wealth. But despite having ten years to figure out how to divest themselves of these holdings and give them to worthy charitable causes, the super-rich have proven unable to get it done.
So what’s the solution? Well, if the private sector can’t provision it, it seems only reasonable that the public sector should get its turn. At the very least, the wealth tax proposals of Bernie Sanders and Elizabeth Warren are in total alignment with the outstanding ambitions of the country’s billionaires, from a dollars-and-cents perspective.
Why, then, have billionaires been so opposed to wealth taxes? No one has been more vociferous than billionaire investor Leon Cooperman, who has gone toe to toe with Elizabeth Warren over her proposal in a series of press spots. Cooperman impugned Warren’s proposed wealth tax and her general distrust of America’s richest individuals in a letter to the candidate, calling the proposal “idiocy,” claiming it was “appealing to the lowest common denominator and basically trying to turn people’s heads around by promising a lot of free stuff,” and eventually tearing up in a television interview with CNBC. “I care,” the hedge fund manager told CNBC’s Scott Wapner.
It may come as a surprise to hear that Cooperman, too, is a Giving Pledge endorser. He signed on in July 2018, complete with a robust public statement. “I think Warren Buffett has said this publicly. When I took the Giving Pledge I told him asking for half is not asking for enough. I intend to give it all away,” Cooperman said at the time.
Giving it all away would represent a much more aggressive rate than the 6 percent wealth tax on income above $1 billion that Warren is pursuing, or the 8 percent Sanders is after, on estates over the ten-figure mark. That would mean that, if anything, Cooperman would find the tax to be not nearly enthusiastic enough compared with his own grand ambitions.
The idea that disbursing only half of one’s wealth is actually too modest for America’s multibillionaires has also been echoed by Gates himself. On multiple occasions, Gates has said he’s striving to give away not just half, but almost all of his fortune, which now clocks in at roughly $108 billion. And yet, right on cue, Gates made waves on Wednesday by condemning the possibility of a wealth tax, claiming (falsely) he’d owe $100 billion, before declaring he was uncertain as to who he’d vote for in a possible Trump-versus-Warren election.
Of course, for Cooperman and Gates and countless other billionaires who have come out against the exceedingly popular proposal, it’s not the money that’s the issue, it’s the power. The contribution they’d be forced to make under such a tax regime wouldn’t meaningfully affect their lives whatsoever. If anything, it might make it easier for them to get a handle on the philanthropic obligations that they’ve been flunking so profoundly.
Rather, it’s the ceding of decision-making power on what to do with that money that these billionaires find so odious. They would rather decide unilaterally where funding is disbursed than have a democratically elected, publicly accountable representative or body make that choice in the public interest. The money is basically immaterial; a minimization of the immense power they’ve amassed, however, might actually be felt.
Indeed, the wealth tax is essential for reasons far beyond its revenue-raising capacities. It would affirm the capacity of government to regulate society’s most deleterious excesses, affirm the priorities of minimizing runaway inequality and ending the new American aristocracy, and prove that the billionaire class doesn’t exist beyond the reach of the democratic process.
Maybe its detractors will prove to be right. Maybe it will be hard to implement, or won’t work exactly as planned. But at the very least, the Sanders/Warren proposals can’t be any worse at achieving their goals than the version the billionaire class has been trying in futility to levy on itself.