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Are billionaires good for the economy? [Part 2]
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Our answer:
Last week, we analyzed billionaires’ wealth, spending, and investments. While wealth and the opportunity to create it are fundamental drivers of our system of prosperity, there's diminishing economic value to multi-billionaires. The current degree of wealth concentration among a small group of individuals doesn't increase relative consumption or investment. Billionaires don't pay their fair share of taxes and could create a lot more value with their money.
How do billionaires impact our economy?
A small group of individuals consume a greater share of the rewards of our global economy each year. There are 2,755 billionaires globally worth $12.2 trillion. Since 1995, the top 1% have captured 19 times more of our global wealth growth than the entire bottom 50% of humanity. The wealthiest 1% have amassed almost double the wealth of the rest of the world over the past two years. Limited taxation has perpetuated wealth concentration at the top. Inheritance has passed entrepreneurship as the most common path to billionaire wealth.
The value of a billionaire to society depends on the scale of wealth, how they created it, and what they do with it. Some billionaires create jobs and drive commerce, but not every billionaire's wealth is proportional to their economic impact. Billionaires have a lot of money to spend, but they don’t necessarily spend it like we do. The wealthiest 0.1% of households save 70% of their income, while the bottom 50% spend more than they earn.
For wealth to be valuable to the broader economy, it has to be in motion: buying goods and services, building new businesses, creating new jobs and products, funding philanthropic initiatives, cycling taxes back to society to perpetuate further growth, etc. Gold buried underground doesn't do anything for anyone. Active wealth helps spur investment and growth, but concentrating it on individuals doesn't increase its benefit. When that wealth avoids taxes, it stops contributing to the main societal system for mutual prosperity.
Do billionaires pay taxes?
They have a talent for avoiding taxation. The tax system is a labyrinth of complexities that allows the ultra-wealthy to maneuver their wealth out of taxation in ways that aren't accessible to the average citizen. An analysis from the White House showed that the 400 families in America's wealthiest top 0.01% paid an average of just 8% in annual income taxes from 2008 to 2022 instead of the 37% top tax rate. The country's richest individuals frequently pay zero taxes. When the average American pays a quarter of their income in taxes, one must question the fairness of our tax structure.
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