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Opinion Pity the billionaire, so sensitive and oppressed

Sen. Mitt Romney (R-Utah) talks to reporters on Capitol Hill. (Jabin Botsford/The Washington Post)

In a search for revenue to fund their social infrastructure bill, Democrats are considering a special tax on billionaires. And Republicans, for whom no principle is more sacred than the idea that the wealthy should pay as little in taxes as possible, are aghast.

This particular tax may not be the best of all approaches; it may be included mainly because Democrats could get centrist senators to agree to it. But the reaction from Republicans requires us to remind ourselves of how much of our debate on taxes revolves around absurd myths that have been disproved again and again.

It’s as though every time an automobile manufacturer debuts a new model we have to spend weeks debating whether the human body will burst into flames if accelerated past 50 miles per hour.

The new proposal would apply only to billionaires or those who earn more than $100 million in income three years in a row, a tiny sliver of the wealthiest Americans. It would require them to pay taxes on the increased value of assets such as stocks, regardless of whether they sold the asset that year. As the system works now, people pay taxes on those assets only when they sell them.

Because this proposal is on the table, we are now required to ruminate on the delicate psychology of the afflicted billionaire, who in Republicans’ telling is always moments away from liquidating his assets and decamping to a mountaintop ashram in despair. We must tiptoe around his sensitive emotions with the utmost care, lest he deprive us of his miraculous job-creating powers.

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For instance, here’s Sen. Mitt Romney (R-Utah) on Fox News:

It’s not a good idea to tell billionaires, “Don’t come to America. Don’t start your business here.” To tell the Steve Jobs and the Bill Gates and people like that, “This isn’t the place to begin your business. Go somewhere else.” That’s a bad idea. But number two, you’re going to tax people not when they sell something, but just when they own it and the value goes up. And what that means is that people who are multibillionaires are going to look and say, “I don’t want to invest in the stock market, because as that goes up I’m going to get taxed. So maybe I will instead invest in a ranch, or in paintings, or things that don’t build jobs and create a stronger economy.”

Though Romney knows many more billionaires than you or I do, his description of their thinking strains logic, to say the least. Jobs and Gates weren’t billionaires who decided to come to America to found Apple and Microsoft because of our low taxes on the rich. They were Americans who became billionaires from the companies they founded here in America.

And the idea that billionaires would suddenly decide to forget about the stock market and turn exclusively to acquiring ranches and paintings because their stock gains will be taxed is ludicrous. We’re supposed to believe that Elon Musk, whose net worth now approaches $300 billion from his stock in Tesla, will tell his board of directors, “If I have to pay more in taxes, then I’m done with stocks. From now on, I want you to pay me in ranches.”

We hear these arguments from Republicans every time a tax increase on the wealthy is proposed: There will be a billionaires’ strike, and the entire economy will collapse. We heard it when Bill Clinton signed a tax hike on them, and when Barack Obama did. Yet there was no mass exodus of the wealthy either time. Why, for instance, has Romney himself not taken his millions and moved to Paraguay, where taxes are quite low? Because he likes it here, and paying a bit more doesn’t affect his lifestyle one iota.

It’s like a 5-year-old threatening to hold his breath until he dies. It’s just not a threat you need to take seriously.

The idea underlying these preposterous assertions is that the wealthy are spectacularly sensitive to even the smallest changes in their tax bills, and will radically alter everything about their lives — the country where they make their home, the way their businesses are constructed — to avoid paying even a penny more.

But there is precisely zero evidence to suggest that’s true. Like almost everything Republicans say about taxes, it’s essentially a religious belief, one that’s immune to refutation by the facts.

What do the superwealthy actually do when faced with a tax increase? They use armies of accountants and tax lawyers to pay as little of that increase as possible (according to the White House, billionaires pay an average of just 8.2 percent in federal income taxes). They don’t leave the country or shut down their businesses.

And of course, there’s a flip side to the Republican argument about the sensitivity of billionaires to tax changes: If we cut their taxes, the billionaire class will erupt like a volcano of prosperity, showering so much new wealth upon us that it will usher in an age of human flourishing unknown in the annals of history.

That doesn’t happen, either. It didn’t happen when Donald Trump signed a big tax cut, or when George W. Bush did. Yet the next time Republicans control Washington, they’ll say it again as they pass yet another cut for the wealthy.

Experience has told us that the Republican arguments about how the superwealthy react to tax changes are just a fantasy. So how about we ask better questions about proposals such as this one: How much revenue would this raise? Will it be difficult to administer? How can it be designed to make cheating harder? Would it make our system more fair? How does it compare with alternatives?

If we consider those questions, we may decide there are better ways to accomplish our goals than this billionaires’ tax. But it shouldn’t be because we’re worried that billionaires, whiny though they might be, will actually do what they always threaten.

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