The case for extreme taxes on extreme wealth
The rise of a billionaire class in North America is a staggering phenomena. North America is home to the super wealthy. It’s hard to get one’s head around what that means. Just eight men, (of the over 2200 billionaires) for example, own as much wealth as the poorest half of the world’s population, that’s nearly 4 billion people. Many of these billionaires earn over a million dollars a day (some as high as $3 million per day) or over $150,000 an hour. Four hedge fund managers made more than $1 billion in annual income last year.
There are over 11 million millionaire households in America – over 7% of Americans, more than the total population of Sweden. The number is growing….faster and faster. America has more millionaires than in any other country. There are also over 3 million millionaires in Canada. According to a report by Credit Suisse, the number of millionaires in Canada will jump by more than half in the next five years, a faster growth rate than other developed countries including the U.S.
In many cases with tax loopholes and incentives, interest forwarding devices, millionaires pay even less than their secretaries or cleaning ladies . Warren Buffett wrote an oped a few years back citing that he pays about 16 percent in income taxes, while many employees earning $100,000 — $200,000 pay about 20 percent in taxes.
Yet, while 90% of 30 year olds in the 1970s earned more than their parents, now less than 50% of 30 year olds do. While the rich have been getting richer, wealth in the middle class has stagnated. While hourly wage rates lag behind the rise of cost living, workers struggle with stagnating incomes. The wealth of the super-rich has increased by an average of 11% a year since 2009. Yet this growth has failed to make a dent in the U.S. poverty rate. At 16.8 percent, it remains the third-highest among western countries (OECD nations) and is more than twice the rate in France. Canada rate has dropped to 9.5% (2017).
Shouldn’t you pay for the advantage of living in a country that fosters and supports entrepreneurs more than any other country ?
If you are willing to pay the excessive costs of over $70 000 per year to attend Harvard university to obtain the accrued lifetime advantages from graduating there, is it not reasonable to pay excessive taxes on income over 10$ million per year as a hedge fund manager or Silicon Valley entrepreneur for the advantages accrued from living and working within a unique economic system that provides myriad advantages to making a fortune that are not as available in any other country in the world. It is that unique combination of advantages, funded by public taxes, that has resulted in the greatest number of millionaires anywhere. Over half the world billionaires live in the North America, (including over 100 in Canada). North Americans are not uniquely genetically coded in their DNA to become richer than people living anywhere else. There are more rich people in the US because the American system of democracy, individual freedoms, capitalistic economy and the remarkable ease of doing business, is implicitly designed to generate great wealth. Shouldn’t you pay proportionately to play in the system. Surely there should be a proportional price to the rich for living in a country that is so advantageous to entrepreneurial activity.
How the System Creates Billionaires
The ease of doing business in the U.S. is described in the The World Economic Forum’s 2018 global competitiveness report as “the closest economy to the frontier, the ideal state”. The Forum’s data indicates that the U.S. is one of the highest ranking nations in measurements of business-friendly policies—‘from ease of starting a business, obtaining credit, trading across borders, and resolving insolvent companies’. According to Carl Riccadonna, Bloomberg’s chief U.S. economist, the capitalist system in the America benefits from established bankruptcy law, relatively low taxes, and the protection of intellectual property. He claims the true edge for American capitalists comes from the country’s public and private institutions of higher education. Top world talent is drawn to American universities providing a steady pool of some of the most creative, entrepreneurial talent anywhere. American universities were labelled as ‘Young Entrepreneur Factories’, by Crimson Education. They argue that the US college system is more advantageous for entrepreneurs than almost any other in the world. Forty-one percent of Fortune 500 companies were founded by immigrants or the children of immigrants. More than half of Silicon Valley startups were founded by immigrants. Most were educated in America universities. The share of all Nobel prizes from U.S affiliated universities has climbed to 73 percent since 2000.
We pay through taxes for police protection, national security, our courts, our health system, why should the wealthy not pay dearly for the advantages offered to them to make fortunes in business by the many unique advantages that facilitate and support making fortunes in North America.
While the republican/conservative mantra for cutting taxes has historically benefitted the super rich over the middle class, recently Liberals/democrats in North America have argued for a variety of schemes of taxing the super-rich. For example, Olivia Alexandria Ocasio-Cortez has suggested taxing 70% of the annual income over $10 million. How much money do you need to be super-rich? Billionaires surely earn far more money in a year than is even necessary to act and spend like the super rich.
Bill Gates, the world’s richest man, has seen his fortune rise by 50% or $25 billion since leaving Microsoft in 2006 without working another day and despite giving much of it away. It is proof of how surplus these excessive billions are. Warren Buffet, Bill and Melinda gates started the Giving Pledge, a commitment currently of 187 billionaires to give away more than half of their wealth to causes including lowering the poverty rate, refugee aid, disaster relief, global health, education, girls’ empowerment, medical research, arts, criminal justice reform and environmental causes. Selma Hayek’s billionaire husband, Francois Henri Pinault donated $113 million to rebuild Notre Dame. His lifestyle and spending habits will not be affected one iota by this decline in total net worth.
There is the Atlas Shrugged metaphor, that over taxing the creators, the producers, achievers, innovators, leads to the decline of the number of very people that produce this enormous wealth, that high taxes stifles entrepreneurialism, ingenuity and innovation. History suggests otherwise. Some of America’s most productive, inventive periods occurred in period of very high taxes on the rich.
It’s easy to forget how much the rich paid in the past. In the 1950s to 1964 the highest marginal tax rates were over 90%! Earlier in 1918, the top income tax rate of the income tax was 77% on income over $1,000,000, to finance World War I. Laughably today, President Franklin D. Roosevelt even proposed a 100% tax on all incomes over $25,000. Imagine! While Ronald Reagan made massive reductions in tax rates, he did not reduce higher marginal incomes. The effective tax rate on the top 0.01 percent of taxpayers remained at 42.9% then. Sweden and Denmark have the highest average tax rates today hovering around 60%. It’s not surprising that their citizens are among the healthiest, safest, best educated, living in the most sustainable environments and are the happiest people on the planet. They pay for it. And, Sweden is rated as one of the world’s top 3 economies for innovation.
Today in the US, the highest income earners pay, 33% on income over $500,000, in a country with no national health plan. The Trump tax reform netted Warren Buffet’s Berkshire Hathaway more than $29 billion in last years tax return. The over 100 billionaires in Canada pay 53.53% on income over $220,000. While average wealth per Canadian adult in 2018 was at $288,260 it was almost 30 per cent lower than in the U.S, but wealth in Canada is more equally distributed than in the U.S. for example, the median wealth per adult in Canada was $106,340, compared with $61,670 in the U.S. There is also a smaller percentage of Canadians with less than $10,000 and a larger percentage of those with above $100,000 than in the U.S.
The North American system leads to a billionaire class of unparalleled dimensions. They are throwing money around willy nilly in a scattered shotgun fashion, from funding the rebuilding of Notre Dame, to financing symphony orchestras, to paying the fees for all medical students at one university. All worthy endeavours but. . . . They are so rich they are funding inconsistently, erratically, what most modern countries do systematically, like providing for national medical coverage, or reducing child poverty, or providing equal funding for every elementary student or providing for needed infrastructure repair.
It’s time the super wealthy paid for all the unique advantages available to them to make their fortunes, just as many pay exorbitant fees at prestigious universities for the advantages that accrue from graduating there.
Diakiwsblog 