The political and economic power wielded by the approximately 750 wealthiest people in America has become a sudden flash point in the 2020 presidential election, as the nation’s billionaires push back with increasing ferocity against calls by liberal politicians to vastly reduce their fortunes and clout.
On Thursday, Michael Bloomberg, a billionaire and former mayor of New York City, took steps to enter the presidential race, a move that would make him one of four billionaires who either plan to seek or have expressed interest in seeking the nation’s highest office in 2020. His decision came one week after Sen. Elizabeth Warren, D-Mass., proposed vastly expanding her “wealth tax” on the nation’s biggest wealth holders and one month after Sen. Bernie Sanders, I-Vt., said America should not have any billionaires at all.
The populist onslaught has ensnared Facebook founder Mark Zuckerberg and Microsoft co-founder Bill Gates, led to billionaire hand-wringing on cable news, and sparked a panicked discussion among wealthy Americans and their financial advisers about how to prepare for a White House controlled by populist Democrats.
Past presidential elections have involved allegations of class warfare, but rarely have those debates centered on such a small subset of people.
“For the first time ever, we are having a national political conversation about billionaires in American life. And that is because many people are noticing the vast differences in wealth and opportunity,” said Timothy Naftali, a historian at New York University.
The growing hostilities between the ascendant populist wing of the Democratic Party and the nation’s tech and financial elite have spilled repeatedly into public view over the past several months, but they reached a crescendo last week with news that Bloomberg may enter the Democratic primary. With the stock market at an all-time high, the debate about wealth accumulation and inequality has become a top issue in the 2020 campaign.
The leaders of the anti-billionaire populist surge, Warren and Sanders, have cast their plans to vastly increase taxes on the wealthy as necessary to fix several decades of widening inequality and make necessary investments in health care, child care spending and other government programs they say will help working-class Americans.
Financial disparities between the rich and everyone else have widened over the past several decades in America, with inequality returning to levels not seen since the 1920s, as the richest 400 Americans now control more wealth than the bottom 60% of the wealth distribution, according to research by Gabriel Zucman, a left-leaning economist at the University of California at Berkeley. The poorest 60% of America has seen its share of the national wealth fall from 5.7% in 1987 to 2.1% in 2014, Zucman found.
But the efforts at redistribution pushed by Warren and Sanders have elicited a fierce and sometimes personal backlash from the billionaire class who stand to lose the most. At least 16 billionaires have in recent months spoken out against what they regard as the danger posed by the populist Democrats, particularly over their proposals to enact a “wealth tax” on vast fortunes, with many expressing concern they will blow the election to Trump by veering too far left.
Bloomberg’s potential presidential bid follows that of fellow billionaires Tom Steyer, a major Democratic donor, and former Starbucks CEO Howard Schultz, who in September suspended his independent presidential bid. Steyer has proposed his own wealth tax, but Schultz ripped the idea as “ridiculous,” while Bloomberg suggested it was not constitutional and raised the prospect of America turning into Venezuela.
Piling on against the wealth tax have been corporate celebrities from Silicon Valley and Wall Street. Zuckerberg suggested Sanders’ call to abolish billionaires could hurt philanthropies and scientific research by giving the government too much decision-making power. Microsoft co-founder Gates criticized Warren’s wealth tax and mused about its impact on “the incentive system” for making money.
David Rubenstein, the billionaire co-founder of the Carlyle Group, told CNBC that a wealth tax would not “solve all of our society’s problems” and raised questions about its practicality. Also appearing on CNBC, billionaire investor Leon Cooperman choked up while discussing the impact a wealth tax could have on his family.
“I don’t need Elizabeth Warren, or the government, giving away my money,” Cooperman said. “[Warren] and Bernie Sanders are presenting a lot of ideas to the public that are morally, and socially, bankrupt.”
Then there is perhaps the most prominent wealthy person of all likely to stand in the way of populist Democrats’ proposals: President Donald Trump. Asked about the wealth tax, a White House spokesman declined to comment directly on the proposal but said in an email, “President Trump has been very clear: America will never be a socialist country.”
But there are signs the pushback is having little impact on nixing the idea in Democrats’ minds. Rep. Brendan Boyle, D-Pa., who has endorsed Joe Biden for the Democratic nomination, told The Washington Post he is crafting a new wealth tax proposal to introduce in the House of Representatives. Boyle’s involvement suggests the idea has broader political support among Democrats than previously thought.
Warren’s campaign has created a tax calculator that shows how much money multimillionaires would pay under her plan. The initial wealth tax raised by Warren would raise close to $3 trillion over 10 years – enough money to fund universal child care, make public colleges and universities tuition-free, and forgive a majority of the student debt held in America, according to some nonpartisan estimates.
America has long had rich people, but economists say the current scale of inequality may be without precedent. The number of billionaires in America swelled to 749 in 2018, a nearly 5% jump, and they now hold close to $4 trillion collectively.
“The hyper concentration of wealth within the top 0.1% is a mortal threat to the American economy and way of life,” Boyle said in an interview. “If you work hard and play by the rules, then you should be able to get ahead. But the recent and unprecedented shift of resources to billionaires threatens this. A wealth tax on billionaires is fair and, indeed, necessary.”
But conservatives and even many Democrats have raised a number of objections to the wealth tax, arguing it could be easily skirted and may have limited political appeal. Microsoft’s Gates, famous for his philanthropic efforts, joked to The New York Times that it could erase his entire fortune. Sen. Chris Van Hollen, D-Md., and Rep. Don Beyer, D-Va., this week proposed a surtax on couples earning more than $2 million a year to address what they framed as unfairness in the tax code exacerbated by the Republican tax cuts, while stopping short of the starker wealth tax.
In an email, Bloomberg adviser Howard Wolfson denied that the prospect of paying the wealth tax factors into the former mayor’s interest in running for president: “Mike’s not worried about what would happen if Elizabeth Warren won. He’s worried about what would happen if Donald Trump won.”
Still, the ultrarich have still taken notice of the threat, according to interviews with half a dozen financial planners and wealth managers.
Kathryn Wylde, president of the Partnership for New York City, whose membership includes many of the country’s biggest financial firms, said members of the business community are “agonizing” over the prospect of having to choose between Warren and Trump in the general election.
“A lot of people in the Wall Street crowd still think the world is top-down,” Wylde said. “They think the people at the top of the pecking order are still making the decisions or driving the debate, as opposed to the new reality of grass-roots mobilization. They don’t realize the way pushback to their criticism goes viral.”
Lance Drucker, president and CEO of Drucker Wealth Management, said he has recently heard alarm from many of his millionaire clients over plans like Warren’s to implement a wealth tax on fortunes worth more than $50 million.
“Honestly, it’s only been the last month when people started getting worried,” said Drucker in an October interview. “These tax proposals are scaring the bejeezus out of people who have accumulated a lot of wealth.”
Some financial planners are urging wealthy clients to transfer millions to their offspring now, before Democrats again raise estate taxes. Attorneys have begun looking at whether a divorce could help the super-rich avoid the wealth tax. And some wealthy people are asking whether they should consider renouncing their U.S. citizenship and moving to Europe or elsewhere abroad ahead of Democrats’ potential tax hikes.
“You’re hearing it already,” said Jonathan Lachowitz, a financial planner at White Lighthouse Investment Management, who said he has heard discussions about leaving the country and renouncing citizenship or other legal tax planning moves due to Democrats’ tax plans from several multimillionaires. “As the frustration mounts and tax burdens rise, people will consider it, just the way you have New Yorkers moving to Florida.”