Pity the Poor Billionaires!

Imagine if you will, you are Warren Buffett (formerly world’s richest person) or Jeff Bezos (currently world’s richest person). No matter really, any other billionaire or multi-multi-millionaire will do, one of the top 1% of 1% of 1%. Imagine you are about 50 years old. You own outright your own home, perhaps more than one, and this year’s model high-end automobile, maybe more than one. Your suits cost $3000 apiece and your family eats out at 5-star restaurants regularly. No stretch, considering your Net Worth.

You don’t have a “job,” you don’t need a “job.” And you don’t own a business. OK, there go Buffett and Bezos, both business owners; but stay with me! Most of your Net Worth (in the hundreds of millions at least) is in – surprise! – stocks and bonds, mostly stocks. In our fanciful scenario, you sell ten million dollars’ worth of stocks and you surrender to the IRS some fraction of your profits in capital gains taxes. Your plan is to put the remainder of the cash in a regular, no interest, checking account; and for the next 40 or 50 years, live off the fat of your bank account, paying no income tax (because you have no income) and no capital gains tax (as you won’t need to sell any more stock to live on). How much can you withdraw annually from the checking account without worrying about a distant tomorrow? In our example, you could write checks for $200,000 every year. Yes, I know, some of these top-of-the-heap men and women LIKE to spend more of their money than a mere $200K / year, but don’t you think you could find a way to live within an after-tax income of $200K / year? You think? I bet Warren Buffett lives well within that amount; he surely could.

The point of this exercise is: you can be filthy, filthy rich and there are absolutely legal ways to avoid paying a red cent of income tax or a red cent of capital gains tax. And this happy trick is not available to the lowly wage earner – like you and me – nearly all of whose income is taxable wages.

And this is not even gaming the system, this is just a feature of a system that didn’t have you – didn’t have us common folk – in mind when they built it. Why is it that so many of our laws seem to benefit the wealthy and all-powerful? It has always been this way; but we are a democracy, and democracies were intended to fix this inequity.

You don’t like it? You don’t think it is “fair”? Well, then, get off your ass and do something! And you’d best get your neighbors to join you in the fight. It will be long and tough-going. But if we don’t win, their share of the people’s wealth will keep growing (the top 1% now sit atop 42% of all the national wealth) while you begin to wonder what life will be like down the road as they get richer and you get poorer. 

P.S., there is a solution to this inequity that is legislative, that doesn’t need to wait for ratification of our 28th Amendment. Tax Wealth, not Income! But that is grist for its own blog post, so stay tuned.