Should The Ultra-Wealthy have to pay a 60% Tax? As a Hardcore Capitalist, I now believe they should. Here’s Why…
I can’t even believe I am writing this blog. As an entrepreneur for the last 15 years and quite possibly one of the biggest fans of capitalism and all that it stands for, I have always believed that you earn in direct proportion to the value you create in the market. If that value happens to make you worth $100 Billion dollars. Then so be it.
At least 50 times in the past decade I have commented and argued with people bashing the wealthy claiming they don’t give enough, and they aren’t doing enough. They give millions to charity, create tens of thousands of jobs, move the planet forward in ways you can’t understand and yet, “they aren’t doing enough?” “Who the hell are you to make that statement and how many jobs have you created?” I would say.
I have always despised critics, primarily because they have no idea what it’s like to build something from the ground up, put it all on the line, risk everything, spend so many sleepless nights wondering if their crazy idea will even work, and often sacrifice everything before going on to have success. I always thought, critics and politicians just see the success, and then start judging, making demands, and looking for clever ways to take it away.
To me, capitalism has always been the most fair and honest system for rewarding those who do the best at serving others. A brilliant concept where anyone, anywhere, regardless of race, sex, background, financial status, or any other class you can think of can have an idea, put in some focus and sweat equity and start something from scratch. They can learn and master skills such as sales, customer service, building a quality product or service, operations, management, networking, and go on to create as much success as they want.
I host The Mentor Nation Podcast and just a few months ago I interviewed a man named Chris Cavallini. He spent years in and out of jail, made a decision to change his life, and then chose to launch a meal prep company. He started by buying meals from a catering company nearby and re-selling them to customers for a small profit. A few years and lots of hard work later, he grew nutritionsolutions.com into an 8 figure business employing dozens of people just getting out of prison and looking for a fresh start. Not going to lie… their clean cheatz (yes with a z for you spell checkers) donuts are the best thing since Game of Thrones.
How about Sara Blakely? The self made BILLIONAIRE who started the clothing line Spanx in her tiny apartment in Atlanta. She had no money but was willing to do whatever it took to make her business work. She ended up sending a care package with her product and some other goodies to Oprah Winfrey having no clue if she would ever hear back. Well…. She did hear back and Oprah recommended her product to her massive following which paved the way for Sara to grow her company into a billion dollar powerhouse fashion line. This is the kind of creativity and work ethic that gets me so fired up about entrepreneurship!!
Why am I telling you all of this?
Because for the first time in my life my views are starting to shift regarding wealth creation. Covid-19 has crushed millions of people and small businesses financially. Restaurants are closing, retail is dying, the unemployment rate is staggering and yet…. The wealthiest have added over $700 Billion to their fortune since the virus began.
Welcome to the age of Tech and Data.
The seed for this blog actually started when I read an article outlining a plan from Bernie Sanders called The Make Billionaires Pay tax, which would tax the wealthiest of the wealthy up to 60% on their gains since Covid-19 started. Not 60% of their wealth… but rather 60% of their Post Covid gains.
Right away, my instinct kicked in and I wanted to laugh and call it the stupidest idea on earth. “Leave them alone,” I thought. This is just another liberal bullshit idea with no basis on anything. Then I started thinking….How have the wealthy added $700 Billion in a few months while the bottom 95% are getting crushed? Each day I’d see article after article of tech companies reaching new highs, Apple approaching $2 Trillion market cap, and a new billionaire adding $5-$10 billion to their net worth in a single day. How did a virus that is destroying global economies and erasing a decade of growth, put billionaires on a fast track of wealth creation?
A thought then came to mind… Maybe the virus didn’t put them on a fast track. Maybe they were already on a fast track due to the things I talk about below, and the virus just sped it up.
Is capitalism as fair as it once was? Or has it changed into an unfair game once you reach a certain level?
Here is why I think the game has changed and it in fact IS NOT fair any longer.
- Data: We live in a time where data is king, and those who control it, control everything. Companies like Facebook, Amazon, Netflix, and Google know more about you, your habits, and your interests than you know about yourself. They build platforms that you spend time on so they can have the ability to monitor everything from your current habits, interests, what you search for, and where you are spending your time so they can offer things that they know you want now. It also, however, allows them the insight to build things that they know you will want in the future. It’s not even fair sometimes if you think about it. I don’t just mean those 4 companies either. Thousands of the largest companies are using the latest tech and Artificial Intelligence to gather your data from any place possible so they can use it to influence your buying decisions. Companies with your data are the new Pied Piper in town and whether you know it or not, you are following their tune. Google has algorithms for the things you search for so that if you randomly search for an answer to a problem, and lots of other people search for answers to the same problem, they can use that data to build the product you were searching for or just buy a company that has already built it. Get this… when they build it… they already know how many people will buy it and who those people are based on who was searching for it.
Here is a simple example of the advantage of data. You go to a website looking for a Tv. You check some brands and prices and start doing a little research. You don’t buy anything. You eat some dinner and then get on social media and every ad you see is for TVs. How the hell did this happen? Retargeting. How did they know? The moment you search for TV’s, they know you have an interest. The moment you visit the website, your info has been captured and they are able to push ads for something they know you were looking for. You might be thinking.. anyone in marketing can use that same data to retarget you and make you buy! Ummm Yes and No.. Yes, anyone with some marketing savvy can place ads and regarget you.. but If you think that some random marketer has the access or ability to use data to make money the same way or on the same level that Google does, you need counseling.(I mean that with love.)
2. Technology: A hundred years ago, it wasn’t common for a company dominating in one area or providing one thing, to venture off into something completely different and also dominate. Technology has changed that. John Rockefeller became the richest man on earth from oil. Andrew Carnegie from steel. Rockefeller didn’t also go and start a grocery chain and grow that into the largest in the world. Things are very different today. You don’t even think about books anymore when you think about Amazon. Amazon can dominate online shopping, but also easily buy Whole Foods, venture into television, and capitalize on cloud storage in just a few short years. With their trajectory, experts estimate Jeff Bezos could be the world’s first Trillionaire (←Funny enough, spell check is trying to correct this word because it probably doesn’t even exist yet.) inside of 5 years. That’s a Thousand Billions!!! With technology advancing so fast, those who have the most money, can outpace everyone else by lightyears by buying or developing technology that allows them to scale quickly, buy up and coming companies that can enhance their own, and venture into entirely new industries and crush the competition right out of the gate. Just look at all of the mergers happening right now or that have happened recently….
Dow and Dupont
Heinz and Kraft
At&t and Time Warner
Disney and Fox
Disney buys Lucas Films and Marvel
CVS and Aetna
United Technologies and Raytheon
Dell and EMC
T-mobile and Sprint
Consolidating and Acquisitions are creating unprecedented wealth for those in the right position.
2. Influence and Control. This is no mystery. With money comes Power, First Hand Knowledge, and Influence. This is perhaps what makes capitalism today the most unfair. My fiancé is a realtor. I can’t tell you how many times she tells me about one of her clients who put an offer on a house… offering more than asking price, willing to buy it as-is, and even writing a letter to the seller pleading with them to take their offer, only to lose it to someone who is paying for the house all cash. It sucks, but it’s real. The world’s wealthiest are able to lobby politicians, pay to know things before anyone else, and control outcomes to a degree that most of us probably can’t even imagine. Kind of shitty if you think about it.
Here is an example of Influence affecting outcomes. As I write this blog on August 16, 2020 it was announced today that Ryan Reynolds(Deadpool actor) sold his spirits company Aviation Gin for $610 million dollars. He literally just bought his stake in Aviation Gin in Feb. of 2018!!! He buys a stake, takes a ton of photos and videos of him drinking the gin and posts it on social media, uses his influence to skyrocket the value, and then he sells.
In 2017 George Clooney did the same thing when he sold Casamigos Tequila for a cool billion dollars.
I love Dwayne “The Rock” Johnson. Just look at how he’s using his influence to create wealth. Just in the last couple of years, he bought Salt and Straw Ice Cream, partnered with UnderArmor to create his own line, started a Tequila company called Teremana, bought the XFL, created his own production company called Seven Bucks Films, and has a stake in NBC’s Titan Games. He works harder than anyone I know and I am NOT taking anything from him because with his journey, he deserves it all. However, I am simply showcasing how “influence” can create advantages and wealth extremely fast.
With social media connecting all of us more than ever before, influence is a currency worth more than money.
Oh.. and don’t forget about control… Not only do the Ultra Wealthy have the advantage when it comes to Influence and how they use that to MAKE more money…. They also have the ability to KEEP and CONTROL that money by hiring the brightest minds on earth to help them with taxes, setting up strategic entities and trusts, and allocating profits to offset losses somewhere else. Yeah… Amazon paid no federal taxes in 2018 despite bringing in $232 Billion in revenue for the year. They didn’t pay taxes in 2017 either. Actually, they got a refund of over $100 million both years. How’s that for controlling an outcome?
3. Good old fashioned compounding: This is the one that gets me. This, my friends, is the one that I just can’t get over. That is perhaps the biggest slap in the face to the masses if you are rich. You can put your money almost anywhere these days(not checking or savings accounts) and get a 5% return or greater. It could be Goldman Sachs, an ETF that follows the Stock Market, Real Estate, or a number of other things. If you have a lot of money, there are special entities like hedge funds and other financial institutions where they cater to high net worth individuals giving them returns of far more than 5%. The stock market alone has averaged a return of 10% per year when averaged over the last 30 years. Let me give you some numbers that blow me away.
$20 million invested at just a 5% interest rate is $1 million per year in passive income
$50 million invested at 5% is $2.5 million per year.
Think about this for a moment. If you have a net worth of $20 million earning 5% interest while you are DOING NOTHING… you will make more money in interest DOING NOTHING than the average American will make working hard for 30 YEARS! This is just the interest we are talking about.. You could be making a cool million per year without ever spending a dollar of your initial $20 million.
Now we aren’t talking about a $20 million net worth here.. the Title of this blog is “Should the Ultra Wealthy be taxed much more?”… The Ultra Wealthy I am talking about are the Multi-Billionaires of the world.
If Mark Zuckerberg who has a net worth of almost $100 billion just put $10 billion of his money into funds that earned 5% interest and gave the rest of his Facebook shares away.. His money just sitting there will make him
$500 million per year or
$41.6 million per month or
$10.5 million per week or
$1.5 million per day!
Ready to throw up? Well check this out..
If Jeff Bezos sold all of his Amazon shares and put all of that cash into investment accounts earning ONLY 5% per year… drumroll… wait for it.. He would earn…..
$8.75 Billion per year or
$729 Million per month or
$182 Million per week or
$26 Million per day.
His interest alone would make him more money per day than the average American working for 770 years! How is that for some perspective?
When you factor these things together, a part of me has changed my tune when a politician proposes a huge tax for the wealthiest of billionaires. At the end of the day, A real question I ask myself is.. How much is enough for one person? A billion? 10 Billion? $100 Billion? I hate socialism and I am still all for Capitalism.. but at some point I think it is important to realize and have some perspective when it comes to the strategic advantages that the ultra wealthy have once they have hit a certain point.
Is it really fair to have so much money that you can stack all 52 cards in your favor in such a way where it’s practically guaranteed that you will only grow wealthier regardless of what you do or how much you spend?
Bill Gates is still worth over $100 Billion for crying out loud! This is after giving away tens of billions of dollars of his wealth. The crazy thing is and many people don’t know this.. He owns only 1% of Microsoft and stepped away in 2008. His real wealth comes from Cascade Investments which is a fund that invests into huge companies like the Four Seasons, Caterpillar, and others. The money is just sitting there making him billions. Even as he gives away billions, his net worth continues to grow on autopilot while he devotes 100% of his time to his charity. Update: He is worth $113 Billion as of today.
Now, I am not saying he doesn’t deserve wealth, hell not even socialist assholes are proposing taking all of their money. I am simply saying that I now believe with all of the current factors at play and the unfair advantage the Ultra-Wealthy have over everyone else due to the factors listed above, that I no longer believe it’s an evil act to propose a large tax on the wealthiest of the billionaires on their gains during Covid-19. Chances are they would just make it back pretty quickly anyway given their advantage.
My Current Stance:
I am a 100% capitalist.
I don’t believe in Socialism.
Yeah this blog might seem to state otherwise.. but it’s true.
I believe everyone can build massive wealth if they choose to and its their right to do whatever they want with their money.
I believe everyone should be treated equally and nobody should be penalized for becoming successful.
With that being said… I’m just an average guy with no education past high school, who has been able to build a pretty successful business. I can honestly suggest to you from a common sense point of view…that based on the direction things are headed, my opinion is there is going to be a MUCH MUCH MUCH larger disparity between the rich and the poor in the near future. I for one see the rich getting far richer and the poor getting far poorer and Jeff Bezos might not be the only one on track to be a Trillionaire in the upcoming future. I believe the advantages the Ultra-Wealthy have are only going to become more and more apparent as times goes on and while everyone still has an opportunity to become successful, advances in technology will completely change the fairness of the playing field.
So my question stands… Is it fair that the Ultra Wealthy be taxed at a far higher rate than they are currently paying?
What do you think?
Disclaimer: I am not a Harvard researcher who spent 16 weeks writing this blog. This article is simply my opinion and my view based on my own research and thinking. Feel free to debate me, fact check me, or criticize this post.
