(This column originally appeared in The Hill)
Recently I was eating at an outside cafe when a man walked by me wearing a shirt that said, “Every billionaire is a policy failure.” But is that really true?
Apparently, he is not the only one who feels this way. At about the same time I was eating my lunch, and more than 3,000 miles away, the California Democratic Party had endorsed a November ballot measure to reduce their billionaires’ wealth by potentially implementing a tax of up to 5 percent on their assets.
All across the country — and across the world — there has been a growing backlash against billionaires, the wealthy and the uber-rich. New York City’s mayor wants them to pay more taxes. So do a growing number of people in Canada, the United Kingdom and Australia. Rich people aren’t popular.
Then again, when were they ever popular?
All of my life I have been a staunch capitalist. I believe in free markets, supply and demand, less government. Yet the guy wearing that shirt stuck with me, even hours after I saw him. What if he is right?
Throughout history, from the Gracchi brothers in the 2nd century B.C. to the overthrow of King Louis XVI in 1792 to the Arab Spring in 2011, there have been revolts, revolutions and wars, all related directly or indirectly to wealth inequality. Maybe letting someone accumulate a billion dollars is truly a failure of policy.
As an aside, the phrase is not new. It was allegedly coined back in 2019 by one of Rep. Alexandria Ocasio-Cortez’s (D-N.Y.) advisers — and maybe there should be a better way to distribute that wealth so that more people can benefit from it.
As a business owner, I have always rejected the idea of punishing the wealthy, whether through higher taxes or other means. I am light years away from ever having a billion dollars in the bank myself. Yet I, like most business people, have worked very hard and taken some pretty big risks to accumulate my negligible amount of wealth. I’ll be damned if the government is going to take any of it from me.
So even entertaining the idea of doing this to other businesspeople is an anathema to me.
Maybe billionaires do have too much. Perhaps their wealth could be put to better use somewhere else. But is taking away their money and giving it to the government the answer? Probably not, for a few reasons.
For starters, billionaires don’t keep stacks of money in their bedrooms. Their money is invested elsewhere. Some of it might be in art, jewelry, yachts, vacation homes, stocks or bonds. It might be in foundations. It might be spent on car services, clothes, high-end restaurants and five-star hotels. The cash of billionaires is being held by bankers, investment managers, insurance firms and brokerage houses.
And, believe it or not, their money is also working. Every purchase of art, real estate, yachts or jewelry benefits others — sellers, appraisers, title companies, brokers, accountants, lawyers, movers, repair shops, landscapers, roofers, plumbers, electricians, babysitters, security guards, limo drivers, cleaners, bartenders. And that goes without mentioning the pizza shops, dry cleaners, auto repair shops and equipment distributors that support those other beneficiaries.
Every time a billionaire spends a dollar, the impact is felt by multiple individuals and small businesses in the food chain. The money that billionaires spend flows into the hands of these recipients, who in turn pay their employees and buy products and services from other firms.
Kim Kardashian, Jennifer Lopez and DJ Khaled may not think so, but there is a limit to what rich people — even billionaires — can buy.
So what happens to the rest of their wealth? It is being put to use by all of the financial institutions that act as a steward for these funds. Stock holdings prop up share prices and companies’ values, which are collateralized for financing to pay for their growth.
Money held in government securities helps to finance government spending.
Assets held by banks and other financial institutions form the capital base to issue loans to individuals and businesses, both big and small.
Billionaires put their money into venture capital firms or become angel investors, helping fund startups and create new industries. Some buy real estate and build office buildings and shopping centers and giant spheres that light up Las Vegas.
If every billionaire is a policy failure — and I’m still not saying this isn’t true — then what is the best answer?
In California, the government wants to take 5 percent of their net worth away. But to do what? To finance another failed homeless program? Another wildly over-budget railway project? To mismanage badly needed water reserves?
Billionaires may not be the most ethical people in the world but, given the outrageous amounts of taxpayer-funded fraud found in states like California, Minnesota and Ohio — and prbably the other 47 states as well — shouldn’t we think twice before taking away their money and giving it to politicians?
California is not even the only state proposing a wealth tax. Washington, Hawaii, Rhode Island and New York are also seriously considering such proposals. Maybe these taxes can be put to good use by elected officials. But maybe letting the billionaires keep and invest their money is a better alternative.
Like so much else in this world, no one really knows. But one thing is for sure: People historically love to hate the rich. There will always be politicians there to capitalize on that hatred. All is fair in love, war and politics.
Maybe every billionaire is a policy failure. Or maybe it is the policies that are the problem, not the billionaires.
