If Adam and Eve could be interviewed they would be shocked with the nation’s immoral wealth gap. Recently, Elon Musk of Tesla fame and Jeff Bezos of Amazon fame got into a public dispute of who is the richest American. According to the Wall Street Journal, Musk taunted Bezos with a second place medallion when he climbed to $318 billion, surpassing Bezos at around $200 billion. According to Forbes data, analyzed by Americans for Tax Fairness, Musk has gleaned a 12-fold increase during the pandemic and an increase of $109 billion in the past month. In 2018, Musk paid zero in federal income taxes and recently moved from California to Texas to avoid state taxes.
Musk and Bezos are not unique. As noted by Katherine Clarke in the Wall Street Journal, the richest Americans greatly increased their wealth during the COVID crisis. A decade ago, Business Week issued an alarm that “for capitalism to prevail, the widening gap between rich and poor must be addressed.” At that time, George Soros made a similar observation in the Atlantic Monthly, saying “unbridled self-interest and laissez-faire policies may destroy capitalism from within.”
The administration has proposed an increase in the income tax for wealthy Americans. The argument is simply that those who have benefitted from the system should give back more to maintain the system that allowed that to happen.
What is complicated is distinguishing between “wealth” and “income.” Income can be legally and easily diluted due to exemptions such as unrealized capital gains, loans taken against assets at low rates to fund luxurious lifestyles, and creative estate planning. As noted in the Wall Street Journal, economists Emmanuel Saez and Gabriel Zucman in their 2019 book “The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay” found the top 400 households by income paid an average individual income-tax rate of only 9.2 percent. More significantly, under current law someone whose net worth is, for example, $100 billion and sold nothing would have no income to report and no tax.
As noted by Ken Thomas and Richard Rubin in the Wall Street Journal, “at death, those unrealized gains aren’t subject to income taxes and heirs only have to pay capital gains taxes when they sell and only on gains since the prior owner’s death.” Perhaps feeling guilty, Elon Musk recently tweeted, “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10 percent of my Tesla stock.”
Eighty years ago, in the grip of the depression and social upheaval, Franklin D. Roosevelt proposed a number of ways to redistribute income to avoid economic apartheid. Some were implemented but many were since diluted or repealed. Now, our society is once more breaking apart on the basis of economic incomes and efforts to redistribute benefits in our society is long overdue. Those who claim that proposed changes will substantially increase the national debt need instead to look at the recent report by the Joint Committee on Taxation, a nonpartisan panel that prepares official revenue estimates of all tax legislation considered by Congress. It found that the funding for the Build Back Better bill would raise $1.476 trillion in revenue over a decade and would unlikely add to the national debt. However, the few at the top strive to protect what they have and seek to fling their wealth into space joy-rides such as Virgin Galactic, Blue Origin, and Space X expeditions. Meanwhile, the many at the bottom perceive that they have little to gain maintaining the system. Overall, worsening conditions for more and more people have led the escalation of disorder. The threat to the present economic system is from within and the rhetoric that foreign battles must be fought “in the interest of national security” sounds increasingly shrill and hollow. The real battlefront is at home, because a system of economic apartheid which offers a future only to a shrinking minority cannot endure.
Interestingly, 50 years ago President Richard Nixon warned about the American decline. As noted by Tom Switzer, Executive Producer of the Centre for Independent Studies in Sydney, Australia, Nixon said, “I think of what happened to Greece and Rome, and you see what is left – only the pillars. What has happened, of course, is that the great civilizations of the past, as they have become wealthy, as they have lost their will to live, to improve, they then have become subject to decadence that eventually destroys the civilization.” Nixon’s lament: “The United States is now reaching that period.” Nixon concluded by urging his countrymen to concentrate on building a nation that is “healthy” both morally and physically.”