Billionaires

Billionaires
Albert Sukoff, Editor

Literally front and center at the Trump inauguration were a quintet of billionaires. Elon Musk, 
Tim Cook, Mark Zuckerberg, Jeff Bezos and Sundar Pichai were seated behind the Trump family but in 
front of Trump’s cabinet appoin- tees. They were meant to be seen. No one missed this.

Coincidently, I have recently watched several left-leaning posts on YouTube, all of which had as a 
theme that billionaires should not exist; that they are a flaw in society and a detriment thereto. 
The gist of all these posts was that billionaires can only become billionaires by unconscionable 
behavior which is exploitative of the mass of humanity. They claim that Jeff Bezos overworks and 
underpays his employees. Apple exploits Chinese workers. Elon Musk is just plain nuts and Bill Gates knew Jeffrey Epstein. Evidently George Soros and Michael Bloomberg are okay, as are Taylor Swift and Oprah Winfrey. All these posts insisted that this concentration of wealth is a major cause of income maldistribution and as such, an anathema to society.

The income distribution effects of billionaires is interesting. It assumes, logically on the 
surface, that if there were no billionaires, there would be greater equity among the world 
population. Is this true? Clearly redistributing the wealth of the richest people on earth would 
make them poorer and someone else richer. But to what degree?

In his grilling of the Trump nominee for Treasury Secretary, Senator Bernie Sanders predictably 
pointed out the three richest men at the Trump inauguration had a cumulative net worth greater 
than half the US population combined. I have heard this before. It is a misleading statistic. 
Credit Karma reports that 31% of American households have a net worth of zero, or worse, a negative 
net worth. In other words, anyone with a net worth of one dollar has more wealth than about 
one-third of the US population combined. This says way more about the average American household 
than the trio of billionaires to whom Sanders referred.

Advocates of redistribution say that there are too many billionaires and that this keeps the 
multitudes in poverty. The real problem however, is that if you want to tap the mega-wealth of 
billionaires to make the lives of the masses more economically stable, there are not nearly enough 
billionaires.

I have this sphere in my office about the size of a softball. You probably have one too. Her name 
is Alexa and it is incredible what she knows. I asked Alexa about billionaires. She tells me that 
their average net worth is a bit over $7,500,000,000. Coincidently, there are about 7,500,000,000 people on earth. This implies that the average billionaire has about a dollar for every person on the planet. According to Alexa, there are fewer than 3,000 billionaires world- wide. This implies that confiscation and redistribution of the entire net worth of all billionaires would be sufficient to give every one of us $3,000. Once. 
For the poorer people around the world, that would be very nice. It does not, how- ever, solve the 
problem of poverty.

There are other companies around the world as large or larger than those effectively owned by the cited billionaires. Most of these have dispersed ownership, so that there is no stick-out-like-a-sore-thumb billionaire to disparage. All of these companies are subject to the same rules against exploitation. If they exploit, the onus is mainly on the regulators who ineffectively enforce the rules. Bad corporate practices
are not unheard of. There may be some unfair advantage attributable to size. But none of this is attributable to the presence of a single figure with a huge stake in the company. Income maldistribution is not a function of concentrated ownership of a few large corporations.

The maldistribution of income is just one of two problems attributed to the existence of a billionaire class. The other deserves more serious consideration. In his farewell speech, Joe Biden warned of an emerging oligarchy of wealthy individuals gaining and exercising too much political power to pursue their own interest at the expense of the broader society. This is an impactful consequence of billionaire involvement in the political process.

Companies owned by first buddy Elon Musk have intrinsic ties to the government. Tesla is benefitted by tax credits on electric vehicles and Space X has multi-billiondollar dealings with the federal government. AI and social media are out-of-control and even the companies which are subject to regulation acknowledge the need for more and better rules. For years, Silicon Valley tried to stay out of Washington. But the heads of the affected companies soon realized they had little choice but to deal with the federal government. Of course, they have every right to participate in the process which is determinative of their future in a major way.

This leaves the question of controls on mega-rich individuals qua individuals. Clearly, Elon Musk has vastly more political influence than your average citizen. His contributions to the Trump campaign exceeded a half-billion dollars. His issues are both related and unrelated to his business interests. How would you limit such influence?

The controversial Supreme Count decision in Citizens United pretty much stifles any limit on political contributions. The court equated these contributions to free speech guaranteed by the first amendment. If you want to limit political speech, you’ll have to change the Court or change the Constitution.

Can extreme wealth be taxed away? In theory, it probably can. Tax rates over 90% in the 1950s was arguably an attempt to do so. The inheritance tax is a largely unsuccessful effort to control dynastic wealth, but it is a precedent. 

Anyone can live as comfortably as decency allows with a billion dollars. Assuming you want to limit 
everyone to one billion dollars in net worth, how would you do that? First, who is everyone? Is it 
a billion dollars per person, per household, per adult? Does a couple with four kids get to keep 
six billion? What happens in a divorce?

Confiscation is undoable. It also has negative consequences. What happens to Tesla stock when 
Musk has to sell millions of shares all at once to pay his wealth tax? Do billionaires like Taylor 
Swift work free for the rest of their lives because they already have a billion dollars? What are 
the consequences of taking large amounts of capital from the money markets and giving it to the 
government? Is more federal spending better than the Gates Foundation?

Life is unfair is many ways. Genetics account for much of the differential success of individuals. 
Do we put a special tax on gifted athletes or beautiful people with acting chops? Or on a guy 
with a better idea which is appreciated and rewarded by millions in the marketplace?
There is a good argument for progressive taxation; maybe more so for income in the mega-bucks 
range. There is an even better argument for an estate tax. Many people are fine with huge wealth 
going to a Bill Gates who created something of great value out of nothing. On the other hand, a 
life of immense comfort and privilege for the offspring of billionaires is offensive.

Billionaires may be an unfortunate result of our economic system, but they are not inherently evil. 
Besides their personal rewards, they clearly create huge wealth and well- being for others. We 
can tax them for a chunk of change without demonizing them. They create the future in ways a 
government never could. Be suspicious but be grateful as well.