According to Forbes magazine, the 400 richest families in America have now accumulated $2.29 trillion in wealth, and growing. Reviewing a 2013 study by the Federal Reserve System, one finds that the wealth share of the top 3 percent climbed from 44.8 percent in 1989 to 51.8 percent in 2007 to 54.4 percent in 2013. Expanding the search to the top 5 percent reveals that “the wealthiest 5 percent of U.S. households own 63 percent of the wealth in the United States.”
An observation can be made that investments made by the 400 families have created thousands of jobs, it’s just that those jobs are located in China, India and Malaysia. Where would China be without the Walton family (WalMart)? Even Warren Buffet, who admits that he has a lower tax-effective rate than his secretary, has invested heavily in the next generation of autos being produced in China, not the U.S.
The economies of China, India, South Korea and Singapore have all benefited from investment from American firms such as Apple, Cisco, HP, Google and Microsoft. Microsoft is currently dealing with the dilemna of how to bring back to the U.S. 93 billion dollars in profits sitting in foreign banks. The dilemma is how to get the money without paying the 35% tax rate it owes on the earnings. Ironically, Bill Gates Sr., father of Bill Gates, is on record as saying that he thinks the rich don’t pay enough taxes. Listen to your Daddy, Bill.
The 5 companies mentioned above have at least 288 billion in profits currently sitting in foreign banks. The 101 billion in taxes due to the U.S. government could fund a lot of education, re-training and investment opportunities for U.S. citizens. For those who are not proponents of reinvesting in America, the 101 billion could be used to pay down the national debt. A “tax holiday” for these firms, similar to the “tax amnesty” back in 2005, will only benefit the “400” and do nothing to lessen the sting to those who have lost their jobs to foreign firms. This flight of capital to other countries, plus the unwillingness to pay taxes due on the profits, strikes me as the height of arrogance and extraordinarily unpatriotic.
Who are these fortunate few? Are these 400 families, the “job creators” we keep hearing about? The sad truth is that most of the 400 are not actively involved in the businesses that brought them wealth. According to the Institute for Policy Studies, “over 60 percent” of the Forbes richest 400 Americans “grew up in substantial privilege.” Many of the 400 are 5th and 6th generations of inheritance. They don’t work for their riches, it’s given to them. They don’t build new businesses, invest in factories or develop creative new ideas. Instead, they invest in money managers, lawyers, and lobbyists. They invest in people who influence our representatives to give them a bigger share of the American dream because they were born wealthy. They invest in PR firms to re-label the inheritance tax as the “death tax”, they invest in spinmeisters that lead us all to believe that some day when we hit the lottery, we’ll want these rules in place for ourselves.
Cousin Ike, named for President Eisenhower, grew up in the 1950s. Back in the “good old days”, the highest marginal tax rate for individuals peaked at 92% in 1952 and 1953. The Golden Era of American Capitalism occurred during the time when America taxed the rich at the highest rate. As Cousin Ike says, “A peacock who sits on his tail is just another turkey.” Maybe high tax rates for the wealthy are what’s needed to get the peacocks off their tails.