Ryan Avent’s self-styled populist post takes to task a rich man’s tax-conscious balance sheet dance:
As far as I can tell, this is entirely within the law. But I don’t think it’s improper to declare it obscene. Shameful, even. With a fortune of that size, additional wealth is about little more than score-keeping.
Everyone has this natural response to a rich person desiring to avoid taxes. We all think like Ryan does:
But let’s be honest for a moment. According to this Bloomberg story, Mr Lampert is worth $3 billion. If he earns just 1% per year on that fortune—and he certainly earns much more—then he takes home $30 million in income. Per year. That’s 600 times the median household income in America. It’s more money than a person can reasonably spend. With that much money you can binge every day, and yet the money will just keep accumulating.
But you don’t have to think much longer than that to see a different side of things. Since Mr. Rich is beyond the binge-every-day constraint, there are lots of other things he can do with his money besides bingeing. For example, if you were Mr. Rich you could probably think of a lot of loved ones you would like to make happy by sharing your wealth with them. Or perhaps you understand that money is what determines what gets done in the world and maybe you have very strong feelings about what should get done.
Like maybe you want to be able to donate to artists or schools or libraries. Maybe you want to help prevent HIV infection. Is it so obvious that a rich man, already beyond bingeing, who wants an extra dollar is being more greedy than a middle-class man who wants to get a dollar closer to the bingeing stage?
Let me be clear that I don’t believe that all of the Mr. Riches are trying to be Bill and Melinda Gates. But I don’t see how you can conclude just from the fact that someone is rich that they don’t have reasons that we would be completely sympathetic to if we knew them.
And if I were a smart do-gooder who thought that everyone on Wall Street was evil the obvious thing to do would be to start a hedge fund, rip them off, and spend their money to meet my goals.
Ghutrah greeting: gappy3000.
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June 13, 2010 at 12:38 pm
Dre
There seems to be a relatively simple solution to your disagreement. What percent of the the wealth (I think that wealth would be a better indicator than income) of the top of the top, say the top .5%, goes to nonprofit organizations. It is not a perfect metric, but it seems like it could be a good fist approximation, especially if it is an extreme value.
This could be used to judge whether your hypothesis seems to be widely applicable. Statistics of this type would allow us to form valid group judgments about our sympathy to the spending of the megarich.
Do you or anyone know where (/if) this data could be found? How much data does the IRS release?
June 13, 2010 at 5:58 pm
gappy
Not sure about the implications of a “Ghutrah greeting”, but it is always nice when a blog you like lists your twitter account. Narcissism aside, when I read Avent’ s post the first issue that came to my mind is “tax arbitrage”. Every asset management company has a “tax optimization” (or “tax harvesting”) group, and hedge fund partners practice the simplest form of such arbitrage, to the envy of their direct reports. I think most people would agree with me that such arbitrages should disappear in a well-functioning economy. I am agnostic about the solution, but it seems a minimal requirement. The second thought was for attacks on inequality of the Alesina-Glaeser-Sheinkman-Shleifer-Easterly type. Maybe it seems a weak argument, but it’ s one that is hard to counter.
On the other side, Avent put forward first a naive argument on the marginal utility of wealth, and then one about self-evident injustice in income disparity. On top of that, the accusations of shameful and obscene seemed like shortcuts he took because he got tired of writing the post.
June 28, 2010 at 8:37 pm
FatMan
That is why such a level of wealth if obscene. Wealth is power, pure and simple. So someone who has 600 times the median income has 600 times the power. Anytime a small minority have power over a large majority there is oppression and exploitation.
The thoughts and desires of everyday americans mean nothing to the apparatus of government. All that matters is money. He who has the gold makes the rules and that is the best argument for trying to prevent the concentration of wealth and for the distribution of it.
When we talk about inequality it’s not about who can afford the best toaster, it’s who can afford the best senator. Inequality of power. Inequality of influence.
Some pigs are more equal than others.