Is Billionaire Philanthropy a Sham?

Remember when Jeff Bezos was showered with praise for donating $100 million to food banks last year?

That may seem like a lot, and it is. But once you consider all that Bezos has raked in during the pandemic – including making $13 billion in a single day in 2020 – it’s a few hours of his earnings. 

It’s not just Bezos. Billionaires like Bill Gates and Warren Buffet also receive lots of praise for their “generous” charitable giving.

The truth about billionaire philanthropy is it isn’t charity. Its public relations, often used to cover up their exploitative business practices, shield their wealth, and deflect attention from all they money they pour into lobbying and campaign contributions to assure that their taxes remain historically low. 

These so-called “charitable contributions” are also tax-deductible, meaning you and I are subsidizing them. I don’t know about you, but I believe taxpayers should be deciding where their tax dollars ultimately go.

America doesn’t need their charity. We need them to pay their fair share in taxes 

You’d think President Biden and the Democratic Party leadership would do everything in their power to stop Republicans from undermining democracy.

So far this year, the GOP has passed roughly 30 laws in states across the country  that will make voting harder, especially in Black and Latino communities. With Trump’s baseless claim that the 2020 election was stolen, Republicans are stoking white people’s fears that a growing non-white population will usurp their dominance.

Yet while Biden and Democratic leaders are openly negotiating with holdout senators for Biden’s stimulus and infrastructure proposals, they aren’t exerting similar pressure when it comes to voting rights and elections. In fact, Biden now says he won’t take on the filibuster, which stands firmly in the way.

What gives? Part of the explanation, I think, lies with an outside group that has almost as much influence on the Democratic Party as on the Republican, and which isn’t particularly enthusiastic about election reform: the moneyed interests bankrolling both parties.

They fear that a more robust democracy would make it easier for the majority of Americans who aren’t wealthy to raise taxes on the wealthy to finance all sorts of things the majority may want, from better schools to stronger safety nets. 

So at the same time white supremacists have whipped up fears about nonwhites usurping their dominance, America’s wealthy have spent vast sums on campaign donations and lobbyists to prevent majorities from usurping their money.

They’ve already whipped up resistance among congressional Democrats to Biden’s plan to tax capital gains at 39.6% — up from 20% — for those earning more than $1 million. And they’re on the way to convincing Democrats to restore the federal tax deduction for state and local taxes, of which they’re the biggest beneficiaries.  

In recent years these wealth supremacists, as they might be called, have quietly joined white supremacists to become a powerful anti-democracy coalition.

Some wealth supremacists have backed white supremacist’s efforts to divide poor and working-class whites from poor and working-class Black and brown people, so they don’t look upward and see where most of the economic gains have been going and don’t join together to demand a fair share of those gains.

By the same token, white supremacists have quietly depended on wealth supremacists to bribe lawmakers to limit voting rights, so people of color continue to be second-class citizens. It’s no accident that six months after the insurrection, dozens of giant corporations that promised not to fund members of Congress who refused to certify Biden as president are now back funding them and their anti-voting rights agenda.

Donald Trump was put into office by this anti-democracy coalition. According to Forbes, 9 percent of America’s billionaires, together worth a combined $210 billion, pitched in to cover the costs of Trump’s 2020 campaign. During his presidency Trump gave both parts of the coalition what they wanted most: tax cuts and regulatory rollbacks for the wealth supremacists; legitimacy for the white supremacists.

The coalition is now the core of the Republican Party, which stands for little more than voter suppression based on Trump’s big lie that the 2020 election was stolen, and tax cuts for the wealthy and their corporations.

Meanwhile, as wealth supremacists have accumulated a larger share of the nation’s income and wealth than at any time in more than a century, they’ve used a portion of that wealth to bribe lawmakers not to raise their taxes. It was recently reported that several American billionaires have paid only minimal or no federal income tax at all.

Tragically, the Supreme Court is supporting both the white supremacists and wealth supremacists. Since Chief Justice John Roberts and Justice Samuel Alito joined in 2005 and 2006, respectively, the court has been whittling away voting rights while enlarging the rights of the wealthy to shower money on lawmakers. The conservative majority has been literally making it easier to buy elections and harder to vote in them.

The Democrats’ proposed “For the People Act” admirably takes on both parts of the coalition. It sets minimum national standards for voting, and it seeks to get big money out of politics through public financing of election campaigns.

Yet this comprehensiveness may explain why the Act is now stalled in the Senate. Biden and Democratic leaders are firmly against white supremacists but are not impervious to the wishes of wealth supremacists. After all, to win elections they need likely Democrats to vote but also need big money to finance their campaigns.

Some progressives have suggested a carve-out to the filibuster solely for voting rights. This might constrain the white supremacists but would do nothing to protect American democracy from the wealth supremacists.

If democracy is to be preserved, both parts of the anti-democracy coalition must be stopped.

What Does Patriotism Really Mean?

Real patriotism is about paying taxes proportional to your wealth; paying your workers a living wage; ending the filibuster to protect voting rights; and reckoning with — not whitewashing — how racial oppression has shaped the nation, and taking restorative action to repair harm.

The Secret Tax Loophole Making the Rich Even Richer

How do we prevent America from becoming an aristocracy, while also funding the programs that Americans desperately need? 

One way is to get rid of a tax loophole you’ve probably never heard of. It’s known as the “stepped-up basis" rule.

Here’s how the stepped-up-basis loophole now works. Take a man named Jeff. At his death, Jeff owns $30 million-worth of stocks he originally bought for a total of $10 million. Under existing law, neither Jeff nor his heirs would owe federal tax on the $20 million of gains because they’re automatically “stepped up” to their value when he dies — $30 million. 

Under Biden’s proposal, Jeff’s $20 million of gains would be taxed. And don’t worry: Biden’s proposal doesn’t touch tax-favored retirement accounts, such as 401-Ks, and it only applies to the very richest Americans.

As it is now, the stepped-up basis loophole enables the super-rich, like Jeff, to avoid paying more than $40 billion in taxes each year. It has allowed them to skip taxes on the increased values of mansions and artworks as well as shares of stock. 

In fact, it’s one of the chief means by which dynastic wealth has grown and been passed from generation to generation, enabling subsequent generations to live off that growing wealth and never pay a dime of taxes on it.

Unless the stepped-up basis loophole is closed, we will soon have a large class of hugely rich people who have never worked a day in their lives. 

Over the next decades, rich baby boomers will pass on an estimated  $58 trillion of wealth to their millennial children — the largest intergenerational transfer of wealth in history.  

Closing this giant tax loophole for the super-rich is how Biden intends to fund part of his American Families Plan, which would provide every child with 2 years of pre-school and every student with 2 years of free community college, as well as provide paid family and medical leave to every worker.

Close this stepped-up basis loophole, and we help finance the programs the vast majority of Americans desperately need and deserve. We also end the explosion of dynastic wealth. It should be a no-brainer.

What if We Actually Taxed the Rich?

Income and wealth are now more concentrated at the top than at any time over the last 80 years, and our unjust tax system is a big reason why. The tax code is rigged for the rich, enabling a handful of wealthy individuals to exert undue influence over our economy and democracy. 

Conservatives fret about budget deficits. Well, then, to pay for what the nation needs – ending poverty, universal health care, infrastructure, reversing climate change, investing in communities, and so much more – the super-wealthy have to pay their fair share. 

Here are seven necessary ways to tax the rich.

First: Repeal the Trump tax cuts.

It’s no secret Trump’s giant tax cut was a giant giveaway to the rich. 65 percent of its benefits go to the richest fifth, 83 percent to the richest 1 percent over a decade. In 2018, for the first time on record, the 400 richest Americans paid a lower effective tax rate than the bottom half. Repealing the Trump tax cut’s benefits to the wealthy and big corporations, as Joe Biden has proposed, will raise an estimated $500 billion over a decade.

Second: Raise the tax rate on those at the top. 

In the 1950s, the highest tax rate on the richest Americans was over 90 percent. Even after tax deductions and credits, they still paid over 40 percent. But since then, tax rates have dropped dramatically. Today, after Trump’s tax cut, the richest Americans pay less than 26 percent, including deductions and credits. And this rate applies only to dollars earned in excess of $523,601. Raising the marginal tax rate by just one percent on the richest Americans would bring in an estimated $123 billion over 10 years. 

Third: A wealth tax on the super-wealthy.

Wealth is even more unequal than income. The richest 0.1% of Americans have almost as much wealth as the bottom 90 percent put together. Just during the pandemic, America’s billionaires added $1.3 trillion to their collective wealth. Elizabeth Warren’s proposed wealth tax would charge 2 percent on wealth over $50 million and 3 percent on wealth over $1 billion. It would only apply to about 75,000 U.S. households, fewer than 0.1% of taxpayers. Under it, Jeff Bezos would owe $5.7 billion out of his $185 billion fortune – less than half what he made in one day last year. The wealth tax would raise $2.75 trillion over a decade, enough to pay for universal childcare and free public college with plenty left over.

Fourth: A transactions tax on trades of stock.

The richest 1 percent owns 50 percent of the stock market. A tiny 0.1 percent tax on financial transactions – just $1 per $1,000 traded – would raise $777 billion over a decade.That’s enough to provide housing vouchers to all homeless people in America more than 12 times over.

Fifth: End the “stepped-up cost basis” loophole.

The heirs of the super-rich pay zero capital gains taxes on huge increases in the value of what they inherit because of a loophole called the stepped-up basis. At the time of death, the value of assets is “stepped up” to their current market value – so a stock that was originally valued at, say, one dollar when purchased but that’s worth $1,000 when heirs receive it, escapes $999 of capital gains taxes. This loophole enables huge and growing concentrations of wealth to be passed from generation to generation without ever being taxed. Eliminating this loophole would raise $105 billion over a decade.

Six: Close other loopholes for the super-rich.

For example, one way the managers of real estate, venture capital, private equity and hedge funds reduce their taxes is the carried interest loophole, which allows them to treat their income as capital gains rather than ordinary wage income. That means they get taxed at the lower capital gains rate rather than the higher tax rate on incomes. Closing this loophole is estimated to raise $14 billion over a decade.

Seven: Increase the IRS’s funding so it can audit rich taxpayers.

Because the IRS has been so underfunded, millionaires are far less likely to be audited than they used to be. As a result, the IRS fails to collect a huge amount of taxes from wealthy taxpayers. Collecting all unpaid federal income taxes from the richest 1 percent would generate at least $1.75 trillion over the decade. So fully fund the IRS.

Together, these 7 ways of taxing the rich would generate more than $6 trillion over 10 years – enough to tackle the great needs of the nation. As inequality has exploded, our unjust tax system has allowed the richest Americans to cheat their way out of paying their fair share. 

It’s not radical to rein in this irresponsibility. It’s radical to let it continue.

According to the New York Times, Donald Trump declared a $916 million loss on his 1995 tax returns – which could have allowed him to legally avoid paying any federal income taxes for 18 years.

The loss stemmed from Trump’s investments in the early 1990s.

Ordinary investors in Trump’s business empire saw the value of their shares plunge to 17 cents from $35.50, bondholders got pennies on the dollar, and scores of contractors went unpaid.

But Trump got a bonanza because the tax code allows “net operating losses” to cancel out taxable income in future years. And the bankruptcy code allows wealthy people to stiff the people they owe by reorganizing their debts under Chapter 11.

Trump didn’t do anything illegal. Real estate losses are notoriously easy to create. Trump bought buildings with borrowed money. He could then deduct interest paid on that debt. On top of that, he could take depreciation deductions, even when his real estate was appreciating in value.

Presto! Trump claimed almost a billion dollars of losses that would cancel his gigantic income gains for years to come. 

Bankruptcy is also easy to utilize, if you’re wealthy enough to find a good bankruptcy lawyer who can use the bankruptcy code repeatedly to shelter your fortune and avoid paying your debts. Trump has used bankruptcy to stiff his creditors at least four times. 

The real scandal here is that Trump and other hugely wealthy people can get away with this, and do so all the time. It’s just another way the system has been rigged – by rich people who buy off politicians to alter tax, bankruptcy, and other laws and regulations to their advantage, just like Donald Trump has done. 

“As a businessman and a very substantial donor to very important people, when you give, they do whatever the hell you want them to do,” Trump told The Wall Street Journal in July 2015. “As a businessman, I need that.”

Trump isn’t and was never a smart businessman. He was and is smart at gaming the system. There’s a difference. 

The 3 Biggest Myths Blinding Us to the Economic Truth

1. The “job creators” are CEOs, corporations, and the rich, whose taxes must be low in order to induce them to create more jobs. Rubbish. The real job creators are the vast middle class and the poor, whose spending induces businesses to create jobs. Which is why raising the minimum wage, extending overtime protection, enlarging the Earned Income Tax Credit, and reducing middle-class taxes are all necessary.

2. The critical choice is between the “free market” or “government.” Baloney. The free market doesn’t exist in nature. It’s created and enforced by government. And all the ongoing decisions about how it’s organized – what gets patent protection and for how long (the human genome?), who can declare bankruptcy (corporations? homeowners? student debtors?), what contracts are fraudulent (insider trading?) or coercive (predatory loans? mandatory arbitration?), and how much market power is excessive (Comcast and Time Warner?) – depend on government.

3. We should worry most about the size of government. Wrong. We should worry about who government is for. When big money from giant corporations and Wall Street inundate our politics, all decisions relating to #1 and #2 above become rigged against average working Americans.

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To hear the media report it, President Obama is proposing a tax increase on wealthy Americans. That’s misleading at best. He’s proposing that everyone receive a continuation of the Bush tax cuts on the first $250,000 of their incomes. Any dollars they earn in excess of $250,000 will be taxed at the old Clinton-era rates.

Get it? Everyone is treated exactly the same. Everyone gets a one-year extension of the Bush tax cut on the first $250,000 of income. No “class warfare.”

Yet regressive Republicans want Americans to believe differently. The editorial writers of the Wall Street Journal say the President wants to extend the Bush tax cuts only “for some taxpayers.” They urge House Republicans to extend the Bush tax cuts for “everyone” and thereby put Senate Democrats on the spot by “forcing them to choose between extending rates for everyone and accepting Mr. Obama’s tax increase.”

Pure demagoguery. 

Regressives also want Americans to think the President’s proposal would hurt “tens of thousands of job-creating businesses,” as the Journal puts it.

 More baloney.

A small business owner earning $251,000 would pay the Bush rate on the first $250,000 and the old Clinton rate on just $1,000.

Congress’s Joint Tax Committee estimates that in 2013 about 940,000 taxpayers would have enough business income to break through the $250,000 ceiling – and, again, they’d pay additional taxes only on dollars earned above $250,000.

All told, fewer than 3 percent of small business owners would even reach the $250,000 threshold.

A third lie is Obama’s proposal will “increase uncertainly and further retard investment and job creation,” as the Journal puts it.

Don’t believe it.

The real reason businesses aren’t creating more jobs is American consumers – whose purchases constitute 70 percent of U.S. economic activity – don’t have the money to buy more, and they can no longer borrow as before. Businesses won’t invest and hire without consumers. Even as executive pay keeps rising, the median wage keeps dropping – largely because businesses keep whacking payrolls. 

The only people who’d have to pay substantially more taxes under Obama’s proposal are those earning far in excess of $250,000 – and they aren’t small businesses. They’re the fattest of corpulent felines. Their spending will not be affected if their official tax rate rises from the Bush 35 percent to the Bill Clinton 39.6 percent. 

In fact, most of these people’s income is unearned – capital gains and dividends that are now taxed at only 15 percent. If the Bush tax cuts expire on schedule, the capital gains rate would return to the same 20 percent it was under Bill Clinton (the Affordable Care Act would add a 3.8 percent surcharge).

Funny, I don’t remember the economy suffering under Bill Clinton’s taxes. I was in Clinton’s cabinet, so perhaps my memory is self-serving. But I seem to recall that the economy generated 22 million net new jobs during those years, unemployment fell dramatically, almost everyone’s income grew, poverty dropped, and the economy soared. In fact, it was the strongest and best economy we’ve had in anyone’s memory.

In sum: Don’t fall for these big lies – Obama wants to extend the Bush tax cut “only for some people,” small businesses will be badly hit, businesses won’t hire because of uncertainty this proposal would create, or the Clinton-era tax levels crippled the economy, 

A ton of corporate and billionaire money is behind these lies and others like them, as well as formidable mouthpieces of the regressive right such as Rupert Murdoch’s Wall Street Journal editorial page.

The truth is already a casualty of this election year. That’s why it’s so important for you to spread it.   

True patriotism isn’t cheap. It’s about taking on a fair share of the burdens of keeping America going.

Those who earn tens of millions of dollars a year but pay less than 14 percent of their incomes in taxes, and argue the rich should pay even less, are not true patriots.

Those who defend indefensible tax loopholes, such as the “carried interest” loophole that allows private-equity managers to treat their incomes as capital gains even if they risk no income of their own, are not true patriots.

Those who avoid taxes by putting huge amounts of their earnings into IRAs via foreign tax shelters are not true patriots.

Those who want to cut programs that benefit the poor – Food stamps, child nutrition, Pell grants, Medicaid – so that they can get a tax cut for themselves and their affluent friends– are not true patriots.

As Justice Oliver Wendell Holmes, Jr., wrote in 1904, “taxes are the price we pay for a civilized society.”

But the wealthiest Americans, who haven’t raked in as much of America’s income and wealth since the 1920s, are today paying a lower tax rate than they have in over thirty years. Even though America faces a mammoth federal budget deficit. Even though public services at all levels of government continue to be slashed. Even though the median wage is still dropping, adjusted for inflation. Even though the typical American is paying more of his or her earnings in taxes – including payroll taxes, sales taxes, and property taxes – than ever before.

I’m not a class warrior. I’m a class worrier. And my worries go to why all this has happened. 

I worry about the political power that comes with great wealth – such as the power of the wealthy to reduce their taxes, cut the public services most other Americans depend on, while at the same time garnering special subsidies and tax breaks for their businesses – big oil, big pharma, big agriculture, military contractors, big insurance, Wall Street. 

I worry about the well-financed big lies that the very rich are the nation’s “job creators,” that the benefits from tax cuts on the rich “trickle down” to everyone else, that American corporations will create more jobs if only their taxes are lowered and if regulations protecting health, safety, and the environment were jettisoned.

I worry about the increasing dominance of Wall Street over our economy and democracy, and the near political impossibilities of closing the “carried interest” loophole that allows private-equity and hedge-fund managers to treat their income as capital gains subject to only 15% tax; of resurrecting the Glass-Steagall Act separating investment from commercial banking, and of breaking up the big banks to protect against another financial crash and bailout of the Street.

You and I have every right to be class worriers – and to be outraged at what has occurred. But we have to get beyond worry and outrage, and do everything in our power to take back our economy and reclaim our democracy.

It was another justice of the Supreme Court, Louis Brandeis, who wrote in 1897, “we may have a democracy or we may have great wealth concentrated in the hands of a few, but we cannot have both.”