Hi Friends of the Patriotic Millionaires,
Last week, we told you the story about how our tax code pits our money against your sweat in a cage fight and how it’s crowned our money the winner. This week, we’re going to tell a different story about how our money always wins—even when there’s no cage fight at all.
In case you missed it, last week we joined Congresswoman Delia C. Ramirez (IL-03) on Capitol Hill to introduce the Equal Tax Act, a landmark piece of legislation that makes the tax code more equitable by, among other things, taxing investment income at the same rate as ordinary labor income. Rep. Ramirez was inspired to introduce the Equal Tax Act after learning about it from The MONEY Agenda, our legislative platform which includes four policy pillars we announced back in April at our Town Hall event. To learn more, check out the full recording of the press conference we hosted HERE—or a great snippet of the remarks made by our President and Founder, Erica Payne, HERE.
 Watch Patriotic Millionaires' Founder and President, Erica Payne, offer her remarks about the Equal Tax Act on YouTube, Facebook, or Instagram.
While we’re still celebrating the introduction of the Equal Tax Act, there is another great piece of tax policy in front of our lawmakers today that we think is worth highlighting as well. Earlier today, Oregon Senator Ron Wyden and Representatives Don Beyer (VA-08) and Steve Cohen (TN-09) re-introduced the Billionaires Income Tax, which would tackle the other main way our tax code favors our money over your sweat by ensuring that capital income is taxed on a regular basis in the same way as ordinary labor income.
For this week’s Closer Look, we’d like to explain how this all works and how legislation like the Billionaires Income Tax would help solve the problem. We’ll start by setting the scene and sharing findings from recent reports that reveal just how much money the wealthiest among our ranks have these days—and also could have in the years to come.
Billionaire wealth in America
Over the past month, we’ve seen a number of bombshell reports regarding billionaire wealth. For starters, the annual Forbes 400 list was published last week, which lists out the 400 richest individuals in America. Familiar names topped the list, including Elon Musk, Larry Ellison, Mark Zuckerberg, and Jeff Bezos. The real surprise from the report is just how wealthy the top 400 have come to be. They are now worth a record combined $6.6 trillion, which is more than the GDP of all countries barring the US and China. In order to join the club a decade ago, you had to be worth at least $1.7 billion; today you need $3.8 billion.
Larry Ellison didn’t score the top spot this year on the Forbes 400 list—that honor went to Elon Musk ($480 billion) for the fourth year in a row—but he did enjoy a historic wealth win of his own the day after the report was released. In a single day, September 10th, he added nearly $100 billion to his net worth, the biggest single-day gain that a billionaire has experienced in history.
Perhaps the biggest billionaire wealth story of the month, though, comes from the ex-DOGE-in-chief, Elon Musk. Tesla’s board has proposed a record compensation package for Musk that would make him America’s (and the world’s) first trillionaire on the condition that he meets certain ambitious targets, such as increasing the company’s profits 24-fold and its stock market valuation 8-fold. However, it’s worth noting that, even without this new pay proposal, Musk is already well on his way to winning the trillionaire race.
$1,000,000,000,000 may look like just a 1 with 12 zeroes behind it. But it’s so, so, so much more than that. So much so that we’ve created some analogies to help you fully grasp just how much $1 trillion really is:- One trillionaire would have the wealth of a million millionaires.
- To make $1 trillion, the median full-time American worker (making $62,192 a year) would have to work 16,079,238 years. That’s longer than human beings, or our closest evolutionary ancestors, have been on Earth.
- The median home price in the US is $410,800. At that rate, a trillionaire could afford to buy 2,434,274 homes and house every single homeless person in America.
The income fiction in our tax code
One way that the tax code has enabled runaway wealth concentration involves the fact that it taxes capital gains, i.e. the increase in value of assets like stocks and bonds over their original purchase price, at a much lower rate than ordinary income. This makes a big difference come Tax Day because, while most Americans make their money through their own labor, the wealthy make most of theirs through capital gains. Check out last week’s Closer Look to get the full story here.
The other, and bigger, way that the tax code has enabled out-of-control inequality involves the fact that it allows wealthy people to not declare any income at all. Yes, you read that right.
Here’s how it works. While working people pay tax every week on the wages they earn from their jobs as construction workers, dental hygienists, teachers, and more, wealthy investors only pay tax on their capital gains when they decide to sell, or “realize,” assets. As long as their investments remain unsold, their gains, under the fiction employed by our tax code, are “unrealized” and not considered income that is subject to tax.
In 2022, roughly 33% of all reported capital gains in America went to the top .01% of households. But that’s child play compared to how skewed things are with unrealized capital gains. That same year, those with over $100 million in household wealth (roughly the top .01%) collectively held at least $8.5 trillion in unrealized capital gains.
In practice, this means that billionaires like Warren Buffett, Elon Musk, and Jeff Bezos can see their fortunes increase by leaps and bounds year after year, but only will pay income tax if and when they decide to sell their stock or other assets. It explains how Warren Buffett can see his wealth grow by $24.3 billion over a five-year period, but only declare $125 million of it in income and pay a true income tax rate of just 0.10%. And while it’s a bit complicated, it also goes a long way in explaining how it’s possible for Elon Musk and Jeff Bezos to get away with paying $0 – that’s right, nothing – in federal income taxes in some years.
Those at the tippy-top (like the .1 to .01%) like to argue that unrealized capital gains shouldn’t count as income because they only exist “on paper” and that they don’t really “have” their wealth until they decide to sell their assets. And yet these same people have no issue using their assets as collateral to take out low-interest loans to fund their extravagant lifestyles. If someone like Elon Musk can come up with $21 billion of his own money and $25.5 billion in loans to purchase an entire social media company at the drop of a hat, it’s safe to say that the wealthy “have” every penny of their unrealized gains at their disposal—and therefore, they should be taxed accordingly.
The Billionaires Income Tax
The Billionaires Income Tax would require the fewer than 1,000 households in America with annual incomes over $100 million or total assets over $1 billion for three consecutive years to pay a minimum 23.8% tax rate on all of their income, including their unrealized capital gains. It also includes strong enforcement provisions and stipulations to prevent billionaires from dodging taxes through using things like shell companies.
While the legislation doesn’t go as far as it should, it’s still a humongous step in the right direction. Our Senior Vice President for Tax Policy, Bob Lord, crunched some numbers on Jeff Bezos’ wealth to demonstrate just how much of a difference a bill like the Billionaires Income Tax could make in arresting America’s extreme growth in inequality. Jeff Bezos currently owns about $200 billion in Amazon stock. If he decided to sell all of his shares right now, under our current tax code, he’d face a tax bill of roughly $47.6 billion and be left with $152.4 billion. But if something like the Billionaires Income Tax had been in place since 1994 when he founded Amazon, and Bezos had been required to pay income tax every year on his unrealized gains, he’d have less than half that much today. Put another way, if Bezos paid income tax every year on his Amazon gains at a rate of only 5%, and sold just enough stock to pay the tax each year, his wealth would be lower than it would be today if he sold his remaining Amazon shares and paid a 23.8% tax on his gains.
Conclusion
We’ve spoken here and there about the dangers that extreme wealth poses to various aspects of our society—from the economy, to the freedom of the press, to our planet, to our democracy, and more. It would take too long to wrap it all up in one place, so we’ll be sure to fully address the idea of why every billionaire is a policy failure in another newsletter.
It’s not just unfair that a McDonald’s cashier pays a higher effective annual rate of tax on their wages than Jeff Bezos does on his Amazon gains, it’s also a stupid way to run an economy. When one person has to pay taxes week after week and another gets to pick and choose when—and even if—they pay taxes at all, it’s an unfair system. And running an economy on an unfair tax system is stupid and wrong.
In other words, it’s not fair that our tax code pits our money against your sweat in a cage fight. But it’s even more unfair that, when it’s not in the cage fight, our money always wins because it’s allowed to sneak out the back door of the tax arena entirely. That’s why we’re so thrilled by the Equal Tax Act and Billionaires Income Tax and proud to be part of these important efforts to reform our tax code and ensure millionaires and billionaires like us finally start paying the country what we owe in taxes.
Warmly,
The Patriotic Millionaires |
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