The quiet revolution of American billionaires
D e Surprisingly, a priori, the idea of heavily taxing the wealthy received major support of the club of major US billionaires. The club, including Warren Buffett, Bill Gates, Jamie Dimon, Mark Cuban, Ray Dalio and Howard Schultz, has launched a vibrant call to modernize American capitalism.
These billionaires are the exact opposite of Socialists Robin Hood. Nevertheless, they consider that substantially taxing the rich to give to the poorest is essential to the preservation of American values. They therefore propose to sharply reduce income inequalities and invest heavily in education to restore equality of opportunity.
The maximum income tax in excess of $ 100,000 was 75% between 1935 and 1960. This highest rate on the highest income was gradually reduced to 65% under Kennedy, 39% under Reagan, 35% under George W. Bush and finally 20% with the latest Trump drops.
Moreover, the richest benefit from a series of tax loopholes that allow them to further reduce their tax threshold. This led Buffet to assert that “the rich are significantly under-taxed compared to the general population.”
Abigail Disney, the heiress of the Disney empire, goes in the same direction by asking to substantially tax the 200 millionaires of New York. Moreover, she asserts that no company executive should earn 500 to 700 times the median wage of its workers. For her, it’s just a question of fairness.
Also, according to these big billionaires, the capitalist system works well only for the richest. While the income of ordinary citizens has stagnated in constant dollars since 1980, that of the richest was multiplied by 10. The consequence is palpable. The difference between rich and poor in the United States has never been greater since 1929. The 1% of the richest Americans now owns more than 90% of the total population of the United States.
According to the Billionaire Club, a significant increase in taxes on the rich would make the tax more productive, address a range of issues affecting the majority of Americans, improve people’s overall well-being and even generate a more productive economy. In words, such an increase is in the long-term interest not only of Americans in general, but also of the better off.
The operation of American capitalism has now become so unbalanced that it is destroying the American dream. It therefore urgently needs to be reformed in order to ensure the survival of the middle class as the basis of American society.
In 1970, 90% of young Americans could hope to earn a higher income than their parents. Today, they are less than 50% to share this dream. The data shows that the United States has virtually ceased to be a country where economic and social mobility prevails. Moreover, the middle class is gradually eroding.
Growing up in a middle class family, however, is a fundamental asset. In addition to having parents caring for him, a young person is guaranteed a good education and access to a job where equality of opportunity prevails. In a word, he can live the American dream.
Ray Dalio, president of the Bridgewater investment fund, said recently that already 60% of Americans have already been excluded from the American dream. According to him, more than half of Americans are already left behind. However, for these 60% of individuals, the possibility of getting out of poverty has been reduced since 1990 from 23% to 11%.
Jamie Dimon, President of Bank JPMorgan Chase, describes how the American dream has frayed as “40% of Americans do not have $ 400 to deal with unexpected expenses, such as medical bills or car repairs “.
This failure is based primarily on a failing education system, an excessively high incarceration rate, and a poorly managed technological shift. As a result, the big billion club believes that the correction of income inequality in the United States has become a “national emergency”. In addition to correcting the tax system, political authorities must also eliminate underfunding in education.
If in 1970, the American education system was the best of the OECD countries, it has become today one of the worst. American schools are so underfunded that they lack basic materials. If in 1994, teachers had equal pay equity, they earned proportionally in 2017 19% less than other professionals.
The Billionaire Club is particularly critical of Trump’s tax cuts. He concludes that a year later, the only real winners are the better off. According to them, tax cuts only accelerate income inequality. Certainly, they are not in favor of a re-election of Donald Trump.
Gilles Vandal is Professor Emeritus at the School of Applied Politics at the Université de Sherbrooke.