# Straight Dope 2/10/2023: Are billionaires bad for democracy? **URL:** \ **Category:** Cecil's Columns/Staff Reports\ **Created:** [February 10, 2023, 3:33pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580 "2023-02-10T15:33:48Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 11, 2023, 3:53pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/21 "2023-02-11T15:53:21Z")
> [@Mr.E](#): > > Right now, people with access to wealth are having an outsized impact on government. Whether they should have that wealth is another argument entirely, but I don’t think it should be controversial to say that a billionaire shouldn’t have more influence on government than a blue-collar worker living paycheck to paycheck. Both are citizens of the same government and both should be expected to contribute their share to the common welfare of all. Instead, the rich are pushing policies that negatively impact everyone else, to the point that a breakdown of social order doesn’t seem unlikely. If wealthy people lived in a vacuum, that might be true. But they don’t. Extremely wealthy people become extremely wealthy because they typically create large scale businesses and any large business is going to have a significant impact (both positive and negative) on the communities where it operates. So let’s pretend I’m a wealthy business owner and you’re the government. You say to me "you make too much money, we’re going to tax you so you make as much as everyone else. Then I say “Well…fuck you then. I’m moving my business somewhere else and taking those jobs, tax revenue, not to mention those awesome products I make with me.” I don’t think your constituents are going to like that. I don’t necessarily disagree that too much wealth concentration is a bad thing. We see countless examples of this. I just don’t really know how to solve it. I don’t believe the government should hold a monopoly on wealth creation, which means you are going to have large concentrations in the private sector. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [February 11, 2023, 4:05pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/22 "2023-02-11T16:05:50Z")
> [@msmith537](#): > > So let’s pretend I’m a wealthy business owner and you’re the government. You say to me "you make too much money, we’re going to tax you so you make as much as everyone else. Then I say “Well…fuck you then. I’m moving my business somewhere else and taking those jobs, tax revenue, not to mention those awesome products I make with me.” The problem is that the government doesn’t say, “we’re going to tax you so you make as much as everyone else” and never will, but that any suggestion of increased taxes at all is met with the threat of “Well…fuck you then. I’m moving my business somewhere else”. It’s a pure strawman argument put forth by wealthy interests to get middle class and lower income people to support lowering taxes on the wealthy even further. And I do ask that wealthy person, where are they planning on moving their business to? Anywhere that has the stability, infrastructure, and educated population of the US is going to have taxes, too. Many of them even higher. It really is a pretty feckless threat that only really fools low information voters and resonates with authoritarian sympathizers. Unfortunately, that makes up more of the electorate than one may wish. No, the _real_ threat is that they say, “You are going to raise my effective tax rate so that I pay the same percentage of my income as my employees? Well… fuck you then. I’m moving my campaign contributions to another candidate.” ---
**Author:** ![Bootb](https://avatars.discourse-cdn.com/v4/letter/b/e19b73/32.png) [@Bootb](https://boards.straightdope.com/u/Bootb)\ **Post date:** [February 11, 2023, 4:45pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/23 "2023-02-11T16:45:31Z")
> [@Chad\_Sudan](#): > > Yes, Elon Musk “built mighty industries out of rocketry and electric vehicles,” but was it necessary for one person to have a billion dollars to do that? Couldn’t the same thing have been accomplished by an equally well-capitalized company? Any company that large that is NOT owned by a single person or family is necessarily going to be beholden to many different people, and possibly groups (investors, etc.). And all those people will naturally have differing opinions of what is desirable to do with the company’s money. So no–no such company is going to do stuff like that, because you’ll never get all the decision-makers on the same page. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [February 11, 2023, 4:47pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/24 "2023-02-11T16:47:11Z")
> [@Bootb](#): > > Any company that large that is NOT owned by a single person or family is necessarily going to be beholden to many different people, and possibly groups (investors, etc.). And all those people will naturally have differing opinions of what is desirable to do with the company’s money. Are you somehow under the impression that Musk funded SpaceX entirely out of his own pocket, that he didn’t have other investors? > [@Bootb](#): > > So no–no such company is going to do stuff like that, because you’ll never get all the decision-makers on the same page. But in the very example that you are trying to use to disprove it, that’s exactly what happened. ---
**Author:** ![Bootb](https://avatars.discourse-cdn.com/v4/letter/b/e19b73/32.png) [@Bootb](https://boards.straightdope.com/u/Bootb)\ **Post date:** [February 11, 2023, 4:52pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/25 "2023-02-11T16:52:38Z")
> [@Chronos](#): > > Except that, with the way US corporate law is structured, creating a business is the opposite of taking a risk. If you start a business and are successful, you get the success. If you start a business and fail, then the business goes bankrupt and is eventually dissolved. Who’s left holding the bag? Not the billionaires. Not everybody believes in bankruptcy. Not all debts can be discharged in bankruptcy. But even if a person (and many people who start & fail at business will go through **personal** bankruptcy, not corporate bankruptcy, because of how their business is structured and funded) does go through bankruptcy, there is a major cost–having your credit report ruined for several years, etc. If that’s not a risk, what is it? ---
**Author:** ![Lumpy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lumpy/32/446_2.png) [@Lumpy](https://boards.straightdope.com/u/Lumpy)\ **Post date:** [February 11, 2023, 8:34pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/26 "2023-02-11T20:34:07Z")
Except that Donald Trump somehow has made a career of being the one who walks away from multiple business train-wrecks. ---
**Author:** ![Lumpy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lumpy/32/446_2.png) [@Lumpy](https://boards.straightdope.com/u/Lumpy)\ **Post date:** [February 11, 2023, 8:41pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/27 "2023-02-11T20:41:00Z")
TL, still reading: I’ll point out that “billionaire” usually means that you’re the owner and controller of assets in the value of billions, and get the benefit (or loss) of those assets. Typically that you’re the “Master and Commander” of financial enterprises with that total value. Not that that figure is your theoretical disposable income or that you have Uncle Scrooge-levels of fungible cash or liquid capital. ---
**Author:** ![Max\_S](https://avatars.discourse-cdn.com/v4/letter/m/46a35a/32.png) [@Max\_S](https://boards.straightdope.com/u/Max_S)\ **Post date:** [February 11, 2023, 9:17pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/28 "2023-02-11T21:17:49Z")
I’m not very knowledgeable about this - but I thought the modern billionaire model was to put your assets up as collateral so you’re always spending other people’s money, rather than paying taxes to realize income. Another topic not touched on by Cecil’s column - taxes. > **[The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the...](https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax)** > > ProPublica has obtained a vast cache of IRS information showing how billionaires like Jeff Bezos, Elon Musk and Warren Buffett pay little in income tax compared to their massive wealth — sometimes, even nothing. ~Max ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [February 11, 2023, 9:28pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/29 "2023-02-11T21:28:45Z")
One thing I’ve often been curious about is whether the wealthy take advantage of the municipal bonds loophole. You don’t pay federal income taxes on municipal bond interest payments, and some states exempt them as well. It seems it would make sense to take out a loan against your assets as collateral, buy up millions or tens of millions of dollars in municipal bonds, then use the interest payments to pay off the loan and to live off the proceeds tax free. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 11, 2023, 9:39pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/30 "2023-02-11T21:39:47Z")
> [@k9bfriender](#): > > > [@msmith537](#): > > > > So let’s pretend I’m a wealthy business owner and you’re the government. You say to me "you make too much money, we’re going to tax you so you make as much as everyone else. Then I say “Well…fuck you then. I’m moving my business somewhere else and taking those jobs, tax revenue, not to mention those awesome products I make with me.” > > The problem is that the government doesn’t say, “we’re going to tax you so you make as much as everyone else” and never will, but that any suggestion of increased taxes at all is met with the threat of “Well…fuck you then. I’m moving my business somewhere else”. It’s a pure strawman argument put forth by wealthy interests to get middle class and lower income people to support lowering taxes on the wealthy even further. > > And I do ask that wealthy person, where are they planning on moving their business to? Anywhere that has the stability, infrastructure, and educated population of the US is going to have taxes, too. Many of them even higher. > > It really is a pretty feckless threat that only really fools low information voters and resonates with authoritarian sympathizers. Unfortunately, that makes up more of the electorate than one may wish. > > No, the _real_ threat is that they say, “You are going to raise my effective tax rate so that I pay the same percentage of my income as my employees? Well… fuck you then. I’m moving my campaign contributions to another candidate.” I was thinking more along the lines of local and state governments (examples like Amazon shopping around for a new HQ or GE’s departure from Connecticut), but you make a valid point as well. The wealthy also have resources to bribe politicians and otherwise lobby for their interests. Particularly when those billionaires own the various channels people use to communicate. Actually the _real_ threat is they say, “You are going to raise my effective tax rate…Well fuck you then. I’m going to make sure the media makes you look like an unelectable fucking idiot 24-7.” ---
**Author:** ![Lumpy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lumpy/32/446_2.png) [@Lumpy](https://boards.straightdope.com/u/Lumpy)\ **Post date:** [February 11, 2023, 9:44pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/31 "2023-02-11T21:44:02Z")
> [@Chad\_Sudan](#): > > Yes, Elon Musk “built mighty industries out of rocketry and electric vehicles,” but was it necessary for one person to have a billion dollars to do that? Couldn’t the same thing have been accomplished by an equally well-capitalized company? Musk is the real-life example of the fictional trope of the eccentric billionaire who bankrolls a wildcat project no one else thought had a snowball in Hell’s chance of succeeding. In 2002 Musk’s vision for SpaceX looked like a pipe dream to anyone but fellow dreamers; the company would never have been founded if it had been up to the sober assessment of a board of directors and investment advisors. ---
**Author:** ![Lumpy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lumpy/32/446_2.png) [@Lumpy](https://boards.straightdope.com/u/Lumpy)\ **Post date:** [February 11, 2023, 9:49pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/32 "2023-02-11T21:49:56Z")
> [@msmith537](#): > > The wealthy also have resources to bribe politicians and otherwise lobby for their interests. . Nitpick: among today’s politicians nobody but rank amateurs does something as crude, glaring and indictable as taking a “bribe”. Campaign contributions and other more subtle methods of quid pro quo are the norm. ---
**Author:** ![Lumpy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lumpy/32/446_2.png) [@Lumpy](https://boards.straightdope.com/u/Lumpy)\ **Post date:** [February 11, 2023, 9:53pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/33 "2023-02-11T21:53:29Z")
> [@BeepKillBeep](#): > > We are in or at least becoming a late stage capitalist dystopia. We’ve been in late-stage capitalism since the Gilded Age. It’s certainly taking a while. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [February 11, 2023, 10:14pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/34 "2023-02-11T22:14:16Z")
> [@Bootb](#): > > But even if a person (and many people who start & fail at business will go through **personal** bankruptcy, not corporate bankruptcy, because of how their business is structured and funded) does go through bankruptcy, there is a major cost–having your credit report ruined for several years, etc. Which is why you don’t go through bankruptcy. You instead have your corporation go through bankruptcy. All of the risk is on the corporation, while all of the reward is on you. ---
**Author:** ![Bootb](https://avatars.discourse-cdn.com/v4/letter/b/e19b73/32.png) [@Bootb](https://boards.straightdope.com/u/Bootb)\ **Post date:** [February 11, 2023, 10:32pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/35 "2023-02-11T22:32:58Z")
> [@Chronos](#): > > Which is why you don’t go through bankruptcy. You instead have your corporation go through bankruptcy. All of the risk is on the corporation, while all of the reward is on you. What corporation? > Sole proprietorships are the simplest and most common form of small business ownership, representing 73% of all small businesses in the United States today (a total of [23 million](https://taxfoundation.org/us-has-more-individually-owned-businesses-corporations) were reported by the IRS in 2010 and again in 2018 by the small business administration (SBA)). > **[Sole Proprietorships: What You Need to Know](https://www.startups.com/library/expert-advice/sole-proprietorship)** > > A comprehensive guide to Sole Proprietorships including how to form one step-by-step, advantages and disadvantages, examples of famous companies, and more. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [February 11, 2023, 10:38pm UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/36 "2023-02-11T22:38:04Z")
Which aren’t the type of corporations billionaires are founding. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 12, 2023, 1:37am UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/37 "2023-02-12T01:37:49Z")
Like many of these threads, people seem to be conflating “capitalism”, “big business”, “Corporate America”, and “billionaires” as if they are all the same thing. They are certainly related, but there are some distinctions. Whether or not large corporations should exist and what sort of constraints and governance should they have is a different question than whether or not individuals should be billionaires. But a lot of, if not most, billionaires weren’t born that way. So if someone starts a successful business, at what point is someone supposed to come in and say “you’ve made too much money, you need to stop now”? > [@Lumpy](#): > > > [@msmith537](#): > > > > The wealthy also have resources to bribe politicians and otherwise lobby for their interests. . > > Nitpick: among today’s politicians nobody but rank amateurs does something as crude, glaring and indictable as taking a “bribe”. Campaign contributions and other more subtle methods of quid pro quo are the norm. Funny story (well…more “hmm” funny than “haha” funny). The consulting firm I worked for ten or so years ago had a “Strategic Communications” practice that was a cross between a lobbyist and a PR firm. If you’ve ever seen the movie Thank You For Smoking or are familiar with the twist ending in Promised Land, they basically do that. Create misinformation or otherwise apply political pressure in underhanded ways. We had a happy hour with them one time and they seemed like the biggest douchebags ever. Not fun “let’s get fucked up and go to the strip club!” douchey like my team. Like “here’s a bunch of evil shit I do in my spare time” douchey. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 12, 2023, 1:54am UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/38 "2023-02-12T01:54:13Z")
> [@k9bfriender](#): > > One thing I’ve often been curious about is whether the wealthy take advantage of the municipal bonds loophole. > > You don’t pay federal income taxes on municipal bond interest payments, and some states exempt them as well. > > It seems it would make sense to take out a loan against your assets as collateral, buy up millions or tens of millions of dollars in municipal bonds, then use the interest payments to pay off the loan and to live off the proceeds tax free. I’m not following your accounting. The interest rate for a margin or SBL loan is typically much higher (8% to 15%) than the interest rate for a municipal bond (around 1.5% to 2%). So I take out a loan, buy a bunch of munis, then use the interest from the munis to pay down the loan? That doesn’t seem like it would work. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [February 12, 2023, 2:57am UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/39 "2023-02-12T02:57:01Z")
> [@msmith537](#): > > The interest rate for a margin or SBL loan is typically much higher (8% to 15%) If you are starting a business or gambling on your brokerage account, you are going to pay a premium on that. The interest rate for a collateral backed loan is much lower. Even my small business can borrow at better rates than that. If you have a couple billion in assets, you are going to be paying only a slight amount over the fed rate. > [@msmith537](#): > > rate for a municipal bond (around 1.5% to 2%). Depends on what and when you buy. Interest rates have been extremely the last decade and a half, so the bond rates up until recently have also been low. Those rates are going up, so so are bond rates. Bond rates will always be a couple points higher than the fed rate. > **[Insights | J.P. Morgan Private Bank U.S. & Canada](https://privatebank.jpmorgan.com/nam/en/insights)** > > Explore ideas from J.P. Morgan’s world-class economists, strategists and investment specialists. JP Morgan seems to think they are a good investment. And I don’t know where you get 1.5-2%, according to [https://fmbnd.investor.trading2.fast-trade.com/fmsbonds/bondsearch.do?sortBy=getDisplayYieldToMaturity](https://fmbnd.investor.trading2.fast-trade.com/fmsbonds/bondsearch.do?sortBy=getDisplayYieldToMaturity) I’m not seeing anything with a less effective yield than 3.75%, and plenty at well over 4%, some as high as 7%. Billionaires probably have access to better resources to find good rates than the ones I just googled up. > [@msmith537](#): > > So I take out a loan, buy a bunch of munis, then use the interest from the munis to pay down the loan? That doesn’t seem like it would work. Based on your numbers, it wouldn’t. But I think that your numbers are based on incorrect assumptions, and therefor are not relevant. You are comparing current interest rates for unsecured debt to lower than historical bond rates. The better your credit rating, the better interest rate, and a billionaire with billions in assets as collateral is actually a somewhat better credit risk than a city or even some states. As long as there is any margin there, all it takes is volume to ramp up to whatever tax free income is desired. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 12, 2023, 3:36am UTC](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580/40 "2023-02-12T03:36:15Z")
I just quickly google a few sites like this one: [https://www.bloomberg.com/markets/rates-bonds/government-bonds/us](https://www.bloomberg.com/markets/rates-bonds/government-bonds/us) Maybe the uber rich can make the numbers work. It just wouldn’t be intuitive to me that it would be worth it to use the interest from a low-risk investment like a muni bond to pay down a loan. Plus they are still presumably taking out the loan for some purpose other than to buy bonds. That’s the real advantage of being mega rich. You can borrow money at low interest rates and leverage it to buy revenue producing assets like businesses and real estate and sports teams. [Previous page](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580.md?page=1) [Next page](https://boards.straightdope.com/t/straight-dope-2-10-2023-are-billionaires-bad-for-democracy/979580.md?page=3)