Author's Note: This is the first in a four-part series on wealth in America.
"I don't care 'cause I'm a billionaire." — from "Blues in the Morning," as performed by Keith Richards
Questions regarding taxes on the wealthy are germinating feverishly in a country struggling with income inequality. CEOs of America's largest 350 corporations made an average of $15.6 million in 2016, 271 times what the average worker brought home. And those millions often pale in comparison to what the owners of those companies bring in.
A good example of the blowback against income inequality is a recent Huffington Post article entitled "Should Billionaires Even Exist?" Some politicians are floating the idea of a 2-3 percent tax on the assets of Americans with a net worth of more than $10 million. Other suggestions include progressive tax rates that top out at 70 percent for the top 0.1 percent. Even a ban on stock buybacks has been proposed, which would prevent companies from making large purchases of their own publicly traded securities, which is a tax-efficient (aka “billionaire friendly”) way of returning capital to shareholders.
One thing is certain: the political battleground over income inequality is just beginning.
But there's something about limiting individual wealth in America that is in direct conflict with everything we believe about our country and free enterprise. Author Bill Bryson, after touring The Biltmore Estate in Asheville, North Carolina, and reflecting upon the incredible Vanderbilt family wealth, said, "No one should be that rich, with the possible exception of myself."
In Bryson's humor we find some truth. Capping wealth for others may or may not be OK, but what about when it's applied to us? Don't we all deserve the right to become as wealthy as we can?
Some would say no, not at the expense of others. But here's the rub. Many billionaires employ hundreds of thousands and provide a decent living for employees. Many ultimately give most of their money away. So by limiting net worth, we'd be minimizing what many billionaires contribute to society, in terms of both employment for others and charitable contributions.
The abundance mentality says that billionaires create a bigger pie for us all to share. The scarcity mentality argues that there are only so many dollars available and that billionaires own too many of them. It’s worth noting that many European countries experimented with extremely high taxes on the wealthy and in recent years have reduced or eliminated many of those taxes. Perhaps not coincidentally, there aren’t too many hot startups coming out of Europe.
Whichever philosophy we ascribe to, it is difficult to justify taxing some Americans twice: once on their annual earnings and again on their total net worth. Some of California's wealthiest citizens already pay upwards of a 60 percent total tax rate when federal, state, property and sales taxes are combined.
Next Week: Huey P. Long's Share Our Wealth Program
Margaret R. McDowell, ChFC, AIF, author of the syndicated economic column "Arbor Outlook," is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a “fee-only” registered investment advisory firm located near Sandestin.