Where On Earth Is All This Money (Billionaires)?

Great Debates
1

The superrich have ridiculous amounts of money. And there clearly is little money to go around on the ground level.

Just what I know. 5% of the population own or control 95% of the wealth in the USA. Also, interesting story, I am sure you all heard. Bill Gates recently gave away most of his wealth. Because I mean, what is he going to do with all that? Even the priciest yacht, even if he wanted a Lear jet. Even if he wanted to buy his own island-- it’s much more money than he would need.

So the money is clearly there. Why don’t we, the people, ever see it then? And is taxing the rich the solution?

The economy? Not really. Back in the 1950’s (sorry again, I have no cites), corporations paid 90% of their capital in taxes. And the economy was booming. And I might add, the middle class came into being, in the USA at least.

Also, I have to wonder. Why didn’t Mr. Gates spend his wealth on his employees? Paid vacations, maternity leave for the man and the woman, a better standard of living?

The money must be there. Why don’t we ever see it? And could it be a conspiracy of sorts? Sorry but I had to ask.

:slight_smile:

2

Billionaires aren’t billionaires because they have a billion dollars. They’re billionaires because they own a billion dollars worth of stuff (real estate, companies, stock, etc.)

3

Gates is retired, remember. He doesn’t have employees any more. Even when he was Chairman, his money wasn’t Microsoft’s money. And I thought he had a plan for giving away his money, and it goes to various charities and NGOs. Microsoft pays pretty well, for employees at least. Not sure about the army of contractors. I worked in Silicon Valley and I couldn’t complain.

In the '50s capital wasn’t taxed at 90%, income and profits were, at the highest levels, and there were all sorts of tax shelters to protect money from that rate, so not many paid it. So that was too high, though what we have now is too low.
Richard Branson and Larry Ellison both have bought islands, by the way.
A lot of the money they have is in stock. Some people, like Ellison, buy racing boats. Some buy politicians. It’s not like it is hid under their mattresses.

4

Well, in the first place, the 90% rate was marginal, meaning they only paid that rate for the part of the income in that bracket. And secondly, most corporations had armies of accounts (slight exaggeration) who worked the books to keep their tax liability as low as possible. I doubt a big company like GE has had a zero/negative tax bill only in recent years.

5

He does, indeed. He and his wife started the Bill & Melinda Gates Foundation in 2000, and have donated roughly $36 billion to it. It’s reported to be the largest private foundation in the world, with assets of over $46 billion, and it spends extensively on building healthcare, reducing poverty, and funding education and access to information technology.

Warren Buffett is a trustee of the foundation, along with the Gateses; Bill Gates and Buffett created something called the Giving Pledge, in which they are trying to inspire wealthy people to pledge at least half of their net worth to philanthropy.

Also, the Gateses have said that they will be leaving $10 million to each of their three children, which will mean that over 99% of their fortune will wind up going to charity.

6

Pre-pandemic, real median household income was the highest it had ever been. Wealth is a different story. But if I buy a share of MSFT for $300 when the markets open this morning, I’ve increased (briefly) the country’s wealth by $700B. Or maybe you’re interested in M0 or MB. It’s hard to determine exactly what flavor of wrong your OP is when you use vague terms like “money” and “ground level” when there are plenty of quantitative data to be had.

7

When my son walked out after 10 years, he would have ended up with $17M except he had already cashed many of his options to buy a house, a car, etc. Still likely had $10M. When his wife was pregnant she got four months maternity leave at full pay. I think Gates fundamentally agrees with you.

8

That’s not even close. The actual number is more like the top 10% have about 70% of the wealth.

9

Focusing on marginal tax rates without looking at deductions or the income levels (inflation adjusted) required to hit various marginal rates is meaningless. Instead you want to look at effective tax rates:

But an even more important graph to care about is the total amount of taxation as a percentage of GDP, because this tells you how much more revenue you can get through tax hikes. The answer: Not much, or maybe none in the long run:

As you can see, since 1945, taxes as a percentage of GDP have varied within a very small range, generally about 16-18%, with a couple of short excursions above and bewlo by a little bit.

Also notice that the declines and increases track the business cycle, and not tax policy. During that period top marginal rates have been as high as 90%, and as low as 28%. Corporate taxes have been higher and lower. And yet, overall taxes only really go up with GDP growth.

Taxing the rich will get you very little. The rich are good at avoiding tax. Taxing luxury goods has been tried, and that resulted in a decline in tax revenue as the workers making the luxury goods lost their jobs.

The only way countries seem to get their net taxes higher as a percentage of GDP is with national sales taxes, excise taxes, and other unavoidable taxes. Those all hit the middle classes and the poor the hardest, but that’s where the money is. Taxing income can only get you so far.

10

You might have to be more specific. We, the people, do see it. The Federal budget is ~$ trillion a year. There was just a $2.2 trillion relief package passed. Most of that money is either paid out to government employees (who are generally not billionaires) or to old/poor people through programs like Medicare and Social Security. The reason it might not feel like there’s very much is that many billions of dollars split between hundreds of millions of people ends up being not that much per person.

If you took all the wealth from all the US billionaires and redistributed it among the US population, each person would get about $20k. Which is a nice chunk of change, but it’s not really life-changing. It’s not like we could all be living a life of luxury if it weren’t for the billionaires hoarding all the wealth. There’s a hard limit to the extent to which we can fund the government via taxing the ultra rich, even if you ignore the potentially disastrous effects that extremely high tax rates might have.

11

No offense but have you ever looked?

Where Bill Gates’ money is isn’t a secret.

12

And if we didn’t have billionaires there would be no SpaceX, no Tesla, no Amazon, no Allen telescope array, no Blue Origin, no Virgin Galactic, no Wal-Mart, no Gates foundation, and Silicon Valley would be a tiny shadow of itself without angel investors and venture capitalists.

SpaceX alone is currently saving the U.S. government about 70-140 million dollars each time they send astronauts to the ISS, It’s saving the U.S. satellite industry billions. And when Starlink goes online, millions of rural people around the world will have cheap access to high speed internet - possibly the biggest step change in the wuality of life in the third world in decades.

You need billionaires for diversity. If NASA was the only organization with enough funds to build rockets, we’d be stuck with slow progress and a dead-end technology forever.

You need people outside the system with the resources to challenge it.

13

By the way, the top 10% owning 70% of the wealth shouldn’t be that surprising. The top 10% are not exactly oligarchs. The top 10% income is right around $100,000. My blue collar brother made more than that. A two-professional income household can easily hit the top 5% in income.

Much of that 70% of wealth owned by the top 10% is simply in the form of homes, cars, and retirement plans. A good pension for a lawyer or a teacher or government worker can be worth over a million bucks and will be counted against your wealth even if you drive a 10 year old car and live in a small modest home.

14

Jeff Bezos and Bill Gates and Richard Branson and Sam Walton weren’t billionaires when they started out. So billionaires didn’t make Amazon or Microsoft or Virgin or Walmart. Amazon and Microsoft and Virgin and Walmart made the billionaires.

If you have the goal of seeing companies like those get created you should stop worshipping billionaires. They all put a lot of effort into making sure that nobody else starts a company that would compete with theirs. No billionaire wants to compete in a free market. Somebody like Bill Gates started one software company and shut down a hundred software companies. That’s not diversity.

15

You’re confusing wealth and income. Really wealthy people don’t get paychecks; they own the company.

16

In terms of net worth, the top 10% starts at about 2 million bucks. That includes equity in their home, the value of their pension, all their savings, and the value of their durable goods.

That is firmly in upper middle class territory, not rich oligarch territory. If you own a small home in Silicon Valley, you’re probably already there. If you are a 50 year old programmer with a decent salary and a good retirement package and you own a home just about anywhere in a decent location, you are probably there. Hell, my wife’s government pension is probably worth a million bucks. A pension that pays $3,000/mo is worth pver $500,000 before you get to the other benefits.

Saying 5% own 95% of the wealth implies a society of serfs and oligarchs. The reality of 10% having 70% of the wealth describes a country with a thriving professional class and a large class of workers on salary or hourly pay with a low savings rate.

But even that isn’t the full picture, as we include private pensions as wealth, but not entitlements. Add in government payments like social security, medicare, medicaid, food stamps and the like as ‘wealth’, and the picture looks different.

For example, if I had a pension that paid about as much as Old Age Security in Canada, it would be valued at several hundred thousand dollars. If my neighbor has no pension, on paper he’s ‘poorer’ than I am, but my pension will be clawed back by the government so that the two of us actually get the same retirement income. But one of us looks wealthier on paper.

17

Richard Branson was a billionaire when he started Virgin Galactic, and it was considered a vanity project at the time.

Paul Allen made his billions at Microsoft, then put his money into things like the Allen Telescope Array, air launched rockets, and billions into advanced medicine. A group of billionaires are funding a multi-billion dollar institute into longevity research.

SpaceX was initially funded with the money Musk earned from selling his interest in Paypal. If there were 90% tax rates that were enforced, he would have had no capital to start SpaceX. Furthermore, SpaceX is still largely funded by billionaires - spaceX just raised 1.9 billion for Starship and Starlink development in a private funding round. Since SpaceX isn’t public, that money came from a small group of very wealthy investors.

Actually, it’s more likely that if the U.S. had those kinds of tax rates, Musk would have stayed in Canada. Or at least Musk would have created Paypal in a more tax-friendly regime. Maybe today SpaceX would be in Costa Rica or Indonesia or somewhere else near the equator where taxes were reasonable.

As for all those guys who were’t billionaires when they founded their companies… All of them raised money from other very wealthy people to finance their ventures. No rich people, no financing.

Also, if tax rates went sky-high on the wealthy, what incentive would any of them have to invest? If the investment fails, you lose it all. If it succeeds, you pay 90% of the proceeds to the government. Do you know what those incentives would do to any investment that carried any risk at all? Would YOU invest your life savings in a business that might fail, and if it succeeds you will only be able to profit mildly from it before the government starts taking the rest?

High taxes on wealth and income destroy investments that have a risk element (almost all), especially at the small business level where people are taking one shot at a business and have no other losses to offset profits.

Let’s say there are no taxes, and I have a new for a business that might fail 90% of the time, but if it succeeds I’ll make ten times my investment. If I invest 100,000 in such an investment, my expectation is an overall profit of $100,000, albeit with huge risk.

Now add a tax of, say, 50% on sale of the business. Now, if my 9-1 shot comes in I will make $500,000 instead of 1 million, so my expectation for this investment is now -400,000, and I would be an idiot to invest.

Big institutional investors aren’t hurt too badly, because if they make this investment 10 times, they can offset the 9 losses against the win, so they just lower their profit from $100,000 to $50,000. But if yiu are investing your own money in a small business and have one shot at it, the tax will drive you away. And the higher marginal taxes go, the worse effect on investment it has. Money starts going to ‘sure things’ like government bonds and t-bills instead of investing in an idea that has big upside for everyone, but risk for the investor.

18

Yet one more factor: Wealth generally tracks with age. Older people are wealthier than young people. In a healthy society, that’s the way it should be. It would be a miserable world where older people have no more wealth than younger ones, despite having decades more to save, invest, get more experienced at their jobs, etc.

So a healthy society will always have age-based wealth inequality, and all else being equal, if a society is aging you woild expect wealth inequality to increase somewhat due to the age effect, so long as the wealth increase by age is not linear.

19

You’re putting a lot of effort into ignoring my argument.

I stand by what I said; growth is predominantly created by people who are trying to become rich not by people who already are rich.