Billionaires Resists Wealth Tax Policy

During the pandemic U.S. billionaires saw their wealth increase by more than $1 trillion. The majority of that increase is not taxed because their net worth is tied up in the stocks they own.

One-point-two trillion dollars – that is how much the wealth of U.S. billionaires has grown during the pandemic, at a time when many Americans have struggled. This has led to new calls for a wealth tax. Some of the super rich are pushing back against it. NPR’s David Gura reports.

DAVID GURA, BYLINE: It’s hard to get your head around these numbers, but there are about 800 U.S. billionaires, and altogether they’re worth more than $5 trillion. That’s a five with 12 zeroes after it. It’s roughly the size of Japan’s entire economy. It’s almost two times the size of India’s.

BEN STEVERMAN: What’s happened during the pandemic is that the wealthiest of the wealthy seem to be reaping a huge percentage of the rewards.

GURA: And according to Ben Steverman, who helps put together the Bloomberg Billionaires Index, the majority of that is untaxed because their net worth is tied up in stocks they own. And under current law, the government can’t touch it.

STEVERMAN: In our tax system, you only get taxed when you sell an investment. A lot of these folks are not selling. They’re just holding on.

GURA: Elon Musk is among those benefiting from this system. Tesla’s stock has surged. The company’s market cap is now more than a trillion dollars. And Musk, who is also the CEO of SpaceX, has seen his fortune go up, well, like a rocket. And that’s because of how he’s paid.

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ELON MUSK: I don’t actually draw a salary or anything. My cash compensation is basically zero.

GURA: That’s Musk in a recent interview. And what he’s getting are company shares. This has drawn criticism. And a few days ago, Musk tried to quiet some of it. The world’s richest man polled his 62 million Twitter followers, asking them if he should sell 10% of his Tesla stock, a stake currently worth about $20 billion. Scott Dyreng is an accounting professor at Duke University, and he says Musk would face a multibillion-dollar tax bill if he were to offload a stake of that size. But Dyreng and other tax experts questioned Musk’s motives.

SCOTT DYRENG: It seems like a little bit of a publicity stunt, which is not uncommon for Elon Musk, to say, hey, everybody’s mad that we’re not paying taxes. How about I just sell 10% of my shares, and then I’ll have to pay taxes on those shares?

GURA: Musk posted his Twitter poll in response to a proposal from Democratic Senator Ron Wyden for a new tax just on billionaires. It’s a narrower version of a wealth tax Senator Elizabeth Warren wants on ultra millionaires, Americans worth more than $50 million.

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ELIZABETH WARREN: Whether you have cash or whether you have a bazillion shares of Amazon – yes, Jeff Bezos, I’m looking at you – whatever form you have your assets – diamonds, yachts, paintings – I think there ought to be a tax on that annually.

GURA: There’s never been a wealth tax in the U.S., and Musk is not the only billionaire pushing back on the concept.

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LEON COOPERMAN: The idea of vilifying wealthy people is so bogus.

GURA: Hedge fund manager Leon Cooperman told CNBC this kind of tax would be unfair.

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COOPERMAN: They’re appealing to the masses. Every billionaire I know made their billions by providing a productive, useful service or product. And that’s why they made their money.

GURA: And, the super rich argue, a wealth tax would be too hard to calculate because the value of stock goes up and down. Cooperman also says he should decide what to do with his fortune, not the government. Accounting professor Scott Dyreng suggests there could be another potential problem.

DYRENG: I have never seen a tax that was not avoided in some way.

GURA: Polls show most Americans believe the rich should pay more in taxes, but there continues to be a disconnect between public opinion and policy. Just a few hours after Senator Wyden put his plan on the table, it was clear there isn’t the political support to pass it.