Decimal envy has multimillionaire “socialists” demanding a ban on billionaire capitalists.
Let’s imagine a fellow who has a bad rash on his arms. He goes to two doctors. The first prescribes a cream that makes the rash generally disappear and reduces that itchy feeling. If the patient stops using the cream, the rash comes back with a vengeance. The second doctor tries to figure out life changes and zeroes in on a modified diet. When the offending food type is removed, the rash disappears forever. The patient is cured.
For about a decade, faux socialists like Bernie Sanders, Chief Liz Warren, AOC, and Mayor Zohran Mamdani have demanded the end of billionaires. How can people have so much money when there is so much poverty? Let’s tax them until they’re only as rich as we are! As most astute observers have noted, even if one taxed all of the U.S. billionaires aggressively, their combined contributions wouldn’t keep the government’s lights on for more than a few days. Even though most U.S. billionaires are Democrats, some key figures like Elon Musk break Republican. The problem for our math-challenged politicians is that they don’t understand what being a billionaire means.
While there are some billionaires who inherited their fortunes and did not exactly “earn” them through their own efforts, their parents and other billionaires reached their status generally for one simple reason: they offered society products or solutions that millions or more people have paid to use or obtain. Look at the names of American billionaires and you can automatically associate them with their companies. And while some billionaires can be super-annoying with their giga-yachts and dumb political views, in the end, they got rich because we bought things that they offered. In almost all cases, nobody forced us to buy their products, and we had every right to buy someone else’s goods or buy nothing at all. When I see a billionaire, I think of the thousands or even millions of people who also benefit from the inventions or products that this guy provided. There is a street not far from our home where every store fixes broken smartphones or tablets. Think of the companies that make phone cases and add-ons like batteries for your phone. So for every Apple billionaire, there are numerous people who provide additional goods like apps and even more who fix the products. One billionaire equals thousands of millionaires (including those who have company stock) and millions of thousandaires who all benefit from the mother company.
The U.S. has by far and away the most recognized billionaires at nearly a thousand. Trying to get a grip on number of billionaires or per capita ranking is hard for a couple of reasons. The top countries in the latter category are all money-parking states like Monaco and Liechtenstein. The U.S. has a per capita billionaire rate of 2.42 for every million people. India has 229 billionaires, but with its large population, that only comes to a per capita rating of 0.144. Nearly one in three of the world’s billionaires lives in the U.S., and that tracks well with the U.S. dominating 80 percent of the highest valued companies in the world. The U.S. has that amazing combination of freedom of expression, a relatively low tax rate, a risk-taking ethos, and reward for success. Many of the billionaires in less free countries simply own the most valuable national assets, like oil or metal production. If one looks at a list of American billionaires, most came from modest to upper-middle-class and broke it open into the financial stratosphere. Bill Gates and Mark Zuckerberg did not attend Harvard in tattered jeans and torn tee shirts, but the wealth they have accumulated to date dwarfs whatever their families had when they grew up. Will immigrant Elon Musk be the first person worth over $1 trillion?
So what our lefty friends do not understand is that being a billionaire is rarely a goal in itself but rather a sign that someone has contributed something extremely useful or valuable to society. If you “ban” billionaires or tax them into oblivion, people will see much less upside in taking risks to set up the next Tesla or Apple. The lefties don’t understand risk because many of them never took any. Mamdani grew up with wealthy parents and has never really worked before becoming mayor. Bernie Sanders has multiple houses and is a confirmed millionaire, all while working public jobs. When companies fail, nobody is there to bail out the founders and investors. That is the flipside of having billionaires, and you can’t have one without the other. For the best or most popular phone maker or social media site, there are tens of competitors who either crashed or were relegated to second-class status. Oftentimes, we are at a loss as to why one company takes off while another with supposedly better products flounders. God works in mysterious ways, and as long as Microsoft exists and is worth trillions, one cannot question that point.
So, they want to tax or “abolish” billionaires? Do they understand that they will kill innovation and productivity? Smart and industrious people will either give up on inventing or, more likely, go to countries where getting rich is not considered a sin. Different countries will have the leading technologies and all of the benefits and advantages that come with the same. Google recently bought Israeli startup, Wiz, for a record (both for Google and for an Israeli company) $32 billion. The state of Israel probably realized $10 billion in taxes—the same amount that Elon Musk alone paid a few years back to the IRS. Banishing billionaires is as dumb as raising taxes and driving people from your home state. I regret that I did not take more business courses during my bachelor's and doctoral science career. I have seen so many scientists with great inventions that make no sense in the market or address no important societal need. Getting a paper published is not the same as making a product that can become profitable.
Socialists give the word “dumb” a bad reputation. We already live at a time where a small percentage of the population pays the lion’s share of taxes. Adding more taxes creates the situation we see in California, where a number of billionaires and companies have fled the state, including Hewlett-Packard, the first “startup.” There is talk of taxing unrealized gains—but not giving back when they swing to unrealized losses—and those who have the most to lose suddenly find themselves living in Florida or Texas. When I met with a Chinese billionaire at his office, he told me about his investment in gold mines in Russia. What he was really telling me was that he found a way to move some of his wealth out of the country should Xi wake up one morning and seize all of his assets. If taxing becomes draconian in the U.S., I would not be surprised to see a new batch of Jewish billionaires gobble up mansions on Israel’s Mediterranean coast as they find the best place to keep and use their money. I remember once reading about Zug, Switzerland. It has no taxes and a 99 percent occupancy rate. Marc Rich fled there before receiving a pardon from Bill Clinton against the wishes of the Department of Justice. Oh, and his ex-wife contributed to the Clinton Library. No doubt just a coincidence.
As the economist Arthur Laffer showed, if you want maximum income, you want neither 0 percent nor 100 percent tax. You need a tax rate that encourages innovation and gets the government a nice return. Taxing billionaires dry will only change the country name on their passports; it will not bring in more money to wasteful Democrat governments.