THE NEWSPAPERS ARE full of reports that a new tax on billionaires may be uncorked. The Washington Post even ran an article estimating what the 10 richest Americans would pay over the next five years should it pass.
I take no stand on the politics of the proposal. But I have seen enough trial balloons to be skeptical that Elon Musk will soon write a 10-digit check to the U.S. Treasury. As Chuck Collins has written in The Wealth Hoarders, billionaires pay their advisers millions to hide trillions. Collins is the great-grandson of hot dog king Oscar Mayer, so he’s seen how wealth works from the inside.
The fledgling tax proposal does meet one important objective, as espoused by the late Senator Russell Long, the longtime chair of the tax-writing Senate Finance Committee. As Long once noted, many people have the same plea: “Don’t tax you, don’t tax me, tax that fellow behind the tree.”
A proposal to tax just the ultra-wealthy does indeed aim the tax gun at somebody else. But can we count on billionaires to stand still? Collins says there are two main ways that the wealthiest deflect taxes. The first is to assign lobbyists to Washington to ward off a blow before it’s imposed. That, no doubt, is happening right now.
The second way is to deploy talented professionals with highly specialized knowledge to adeptly navigate a complex tax landscape. Several recent dumps of secret legal papers have shown that—should it get that far—assets can be moved offshore or to tax-friendly states like South Dakota.
Of course, if options A and B don’t work, there’s always the nuclear option—giving the money away. That’s the idea behind the giving pledge endorsed by Bill Gates and Warren Buffett, two of the tax proposal’s principal targets.
Signers of the pledge promise to give away the majority of their wealth to philanthropy. This is a generous impulse, but it’s also far-sighted. Since estates that contain assets of more than $23.4 million per couple are taxed at a 40% federal rate, why not give away what Uncle Sam was only going to take?
The creators of great wealth—like Rockefeller, Getty, Gates and Ford—can extend their influence beyond a single lifetime by endowing a foundation. It’s either that or blast off for Mars. There’s no tax code there—so far.