Don’t cry for Bill Gates. Or Jeff Bezos. Or Warren Buffett or Larry Ellison or other U.S. billionaires when it comes to Elizabeth Warren’s wealth tax. Because they’re still going to continue getting wealthier far faster than you or I ever will.
Even if they had been paying that tax every year for the last ten, they’d be almost as wealthy as they are today.
This isn’t conjecture. Instead, it’s calculation based on curiosity and arithmetic.
What sent me into old Forbes billionaires lists and a simple spreadsheet model was the back and forth between Bill Gates and Elizabeth Warren. It started with Gates talking to Andrew Ross Sorkin at the at The New York Times DealBook Conference last Wednesday.
Gates claimed he had paid more than $10 billion in taxes and that double the amount would have been “fine” as well. “But, you know, when you say I should pay $100 billion, O.K., then I’m starting to do a little math about what I have left over,” he told Sorkin. “Sorry, I’m just kidding. So, you really want the incentive system to be there and you can go a long ways without threatening that.”
Warren’s response—beside some Twitter exchanges with Gates—was to create a calculator for billionaires who wanted to know what they’d pay, with some examples like Gates, Jeff Bezos, and Mike Bloomberg. Clever trolling, but a static representation of how much someone would be expected to pay this year.
However, how would that affect wealth growth? Many billionaires and Wall Street denizens have complained that Warren’s plan, or something similar, would destroy capitalism. Suddenly all those wealthy people would lose what they had—probably go begging on the street with a tin cup because billionaires wouldn’t have money left. Or they’d feel disinclined to invest because there would be no returns.
So, I set out to find an answer and started with the plan’s details: “an annual 2% tax on every dollar of net worth above $50 million and a 3% tax on every dollar of net worth above $1 billion.”
I chose four billionaires—Bill Gates, Jeff Bezos, Warren Buffett, and Larry Ellison—and looked up their net worth, as estimated by Forbes, over the 10-year span from 2010 through 2019.
Then I created a formula that applied the tax formula to each year and then the percentage of growth from that year to the next that occurred without the tax. Essentially, I took out the tax for each year and then assume the similar market and financial dynamics would create the same degree of expansion, only on a lower amount. Below is a graph showing the wealth growth, both with and without the taxes for each of the four.
In 2010, Gates had an estimated $53 billion. Without the tax, in 2019—the tenth year—he had $96.5 billion. With Warren’s wealth tax all along, he’d have likely had $93.6 billion. Bezos started the period with $12.3 billion and ended, untaxed, with $131 billion. With taxes, $127 billion. Buffett goes from $47 billion to $82.5 billion rather than a taxed $80 billion. Ellison? From $28 billion to $62.5 billion rather than $60.6 billion.
Notice how small the deviation is between the two lines for each person. The reason is that people with real money to invest get much higher return rates then you’re ever likely to see in your 401(k) or savings account. The 3% tax over $1 billion may lower the final rate, but it’s unlikely to erase it.
Anyone claiming that billionaires would no longer have money to invest needs to sit down with a calculator and without strongly help preconceptions. But does a Bill Gates really not know the details? Has the thought of losing all that money made him incapable of asking one of the people working for him to check?
It’s a pretty sure bet that all the billionaires have made it their business to do their own models, likely far more sophisticated than mine, to get to the truth. That they know their fortunes will continue to climb.
But you will continue to hear these nonsense arguments because the point of those offering a blanket objection to a wealth tax is not fairness. Instead, they project a devotion to greed and power. Yes, there is a growing gap because there is less money to take advantage of compound interest. And that still can leave billionaires with plenty.
How much money, power, and influence do people need? Apparently, no amount will satisfy some. So, if you’re going to cry, do so for the broken families in areas that industry has left behind or for poor families who can’t get a break or children who go hungry or students with promise seeing the possibility of higher education that might transport them to another life evaporate with the appearance of a tuition bill.
The ultra-wealthy can always hire someone else to spill tears for them. Or to argue how so dangerous the idea of Warren’s wealth tax might be without actually addressing the reality. Chasing a ghost is so much scarier and potentially more motivating to most people. And, you have to acknowledge that they are right. If you heard someone complain having only $93.6 billion after ten years, how sympathetic would you be?