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by Robert Reich
November
11, 2019
from
NewsWeek Website
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Robert B. Reich
Newsweek
Columnist and chancellor’s professor of public policy at the
University of California, Berkeley
He is an
American political commentator, professor and author.
He served in the
administrations of Presidents Gerald Ford, Jimmy Carter and Bill
Clinton.
His most recent
book is
The Common Good. |
Billionaires are wailing that
Elizabeth Warren's and
Bernie Sanders's wealth tax proposals are 'attacks' on free
market capitalism.
Warren "vilifies
successful people," says Jamie Dimon, CEO of JPMorgan Chase.
Rubbish...
There are basically only
five ways to accumulate a billion dollars, and none of
them has to do with being successful in free market capitalism.
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The first way
is to exploit a monopoly.
Jamie Dimon is worth $1.6 billion. That's not because
he succeeded in the free market.
In 2008 the
government bailed out JPMorgan and other giant Wall Street
banks because it considered them "too big to fail."
That bailout is a hidden insurance policy, still in effect,
with an estimated value to the big banks of $83 billion a
year. If JPMorgan weren't so big and was therefore allowed
to fail, Dimon would be worth far less than $1.6 billion.
What about America's much-vaulted entrepreneurs, such as
Jeff Bezos, now worth $110 billion? You might say Bezos
deserves this because he founded and built Amazon.
But Amazon is a monopolist with nearly 50 percent of
all e-commerce retail sales in America, and e-commerce is
one of the biggest sectors of retail sales.
In addition,
Amazon's business is protected by a slew of patents granted
by the U.S. government.
If the government enforced anti-monopoly laws, and didn't
give Amazon such broad patents, Bezos would be worth far
less than $110 billion.
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A second way
to make a billion is to get insider information unavailable
to other investors.
Hedge-fund maven
Steven A. Cohen, worth $12.8
billion, headed up a hedge fund firm in which, according to
a criminal complaint filed by the Justice Department,
insider trading was,
Nine of Cohen's
present or former employees pleaded guilty or were
convicted.
Cohen got off
with a fine, changed the name of his firm, and apparently is
back at the game.
Insider trading is endemic in C-suites, too.
SEC researchers
have found that corporate executives are twice as likely to
sell their stock on the days following their own stock
buyback announcements as they are in the days leading up to
the announcements.
If government cracked down on insider-trading, hedge-fund
mavens and top corporate executives wouldn't be raking in so
much money.
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A third way
to make a billion is to buy off politicians...
The
Trump tax cut is estimated
to save Charles and the late
David Koch and
their Koch Industries an estimated $1 to $1.4 billion a
year, not even counting their tax savings on profits stored
offshore and a shrunken estate tax.
The Kochs and
their affiliated groups spent some $20 million lobbying for
the Trump tax cut, including political donations. Not a bad
return on investment.
If we had tough anti-corruption laws preventing
political payoffs, the Kochs and other high-rollers wouldn't
get the special tax breaks and other subsidies that have
enlarged their fortunes.
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The fourth way
to make a billion is to extort big investors.
Adam Neumann conned JP Morgan, SoftBank, and
other investors to sink hundreds of millions into
WeWork,
an office-sharing startup.
Neumann used some
of the money to buy buildings he leased back to WeWork
and to enjoy a lifestyle that included a $60 million private
jet.
WeWork
never made a nickel of profit.
A few months ago, after Neumann was forced to disclose his
personal conflicts of interest, WeWork's initial
public offering fell apart and the company's estimated value
plummeted.
To salvage what
they could, investors paid him over $1 billion to exit the
board and give up his voting rights. Most other WeWork
employees were left holdingnear-worthless stock options.
Thousands were set to be laid off.
If we had tougher anti-fraud laws, Neumann and others like
him wouldn't be billionaires.
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The fifth way
to be a billionaire is to get the money from rich parents or
relatives.
About
60 percent of all the wealth in America today is
inherited, according to estimates by economist
Thomas
Piketty and his colleagues.
That's because,
under U.S. tax law - which is itself largely a product of
lobbying by the wealthy - the capital gains of one
generation are wiped out when those assets are transferred
to the next, and the estate tax is so tiny that fewer than
0.2 percent of estates were subject to it last year.
If unearned income were treated the same as earned income
under the tax code, America's non-working rich wouldn't be
billionaires.
And if capital
gains weren't eliminated at death, many heirs wouldn't be,
either.
Capitalism doesn't work
well with,
Billionaires who don't
like "Sanders's and Warren's wealth tax" should at least
support reforms that end these anti-capitalist advantages.
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