Wealthiest 20 Americans Have More Wealth Than the Entire GDP of India
Thursday, December 3, 2015
SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to the Real News Network. I’m Sharmini Peries coming to you from Baltimore.
In the glow of Facebook owner Mark Zuckerberg and his wife, Dr. Priscilla Chan, announcement of the birth of their first child, they also pledge to put 99 percent of their Facebook, Inc. shares, currently worth about $45 billion, into a new philanthropy project that would focus on human potential and quality, which they announce in a letter to their newborn daughter.
Well, a new report from the Institute for Policy Studies shows that the 20 wealthiest households in the nation possesses more wealth than the entire bottom 50 percent of us. It also says that Forbes 400, which is the annual ranking of the 400 wealthiest people in the country, they are endowed with more wealth than the entire GDP of India. The report is titled Billionaire Bonanza: The Forbes 400 and the Rest of Us. Its co-author, Josh Hoxie, joins us from Boston. Josh is a director of the Project on the Opportunity and Tax at the Institute for Policy Studies. Josh, thank you so much for joining us today.
JOSH HOXIE: Thank you for having me, Sharmini.
PERIES: So Josh, before we get into findings of the report itself, tell us about Mark Zuckerberg and where he ranks in the list of the 20 wealthiest households. And is this really true, what he’s giving up in terms of 99 percent of his shares in Facebook?
HOXIE: Sure. Mark Zuckerberg is the seventh wealthiest person in the country. He owns about $45 trillion–or sorry, $45 billion in wealth. When you get that high it’s hard to keep track. Mark Zuckerberg is interesting because he’s the founder of Facebook. His wealth is mostly in the form of Facebook shares. And what he’s decided is that he’s going to create a private company for philanthropic purposes and transfer, over the course of his lifetime, 99 percent of those shares into that company.
Now, when he announced this on the, you know, news of the birth of his daughter, a lot of news outlets immediately jumped to what a great charity, act of charity, this was. The reality is it’s not a charitable act at all. It’s actually not a charity, it’s not a nonprofit. It’s a for-profit entity. There are no restrictions on how the money can be used. And what I think is the most important part is that Zuckerberg and his wife, Priscilla Chan, retain full control over how these assets can be deployed. So he’s not really giving his money away. I would not say that’s accurate. What I would say is that he set his money aside into this fund, and it now can be used for whatever he deems to be philanthropic.
There’s another side of this, which I also think is interesting. Why would he do this? Why do this instead of, you know, other ways of just giving his money away, if that was really what he wanted to do? And I’d say there’s two reasons. One is there’s major tax implications here. If he were to just sell his shares in Facebook, he would end up paying capital gains tax, which is significant. Or if he were to hold on to his shares and pass them on to his daughter, another heir on his death, he would pay estate tax. But giving his money to the LLC, or this private company, he sheds himself of this tax burden. And there’s a good chance that money never gets taxed, which is–has remarkable implications for us as a nation.
PERIES: Josh, incredible given how many of us are actually involved in Facebook, which increases his wealth every day. And of course we, by participating in it, allows that continued growth of Facebook and its wealth as well. Interesting times. Josh, let’s get to your report, which presents some very staggering statistics in terms of the wealth of the Forbes 400 and the 20 wealthiest households in the nation. Share with us some of your most striking facts and findings.
HOXIE: Yes. So we thought it was interesting, these 20 people, the amount that could fit into a private jet. And with eight pages of glossy private jet ads in this year’s Forbes 400 magazine, safe to say most of them aren’t flying commercial. These 20 people hold as much wealth as half the country, over 150 million people. Put differently, if you were to think about typical families, those with median wealth, which in this country is $81,000, the Forbes 400 have more than 36 million typical families. And one way to think about this figure is that that’s the same number of families in this country who own cats. And if you’ve been on the internet lately, there are a lot of people with cats in this country who love nothing more than posting pictures and videos online of them.
So the wealth concentration has staggering–become staggering. And that matters to folks because it has implications for our lives. You know, we used to talk about the 99 percent and the 1 percent. What we’re really seeing is the 0.1 percent and the 0.0001 percent, seeing their assets and wealth rise dramatically. And we’re not seeing that rise throughout the economy.
PERIES: And Josh, what did you find in terms of any racial disparities or configurations in terms of your findings?
HOXIE: Yeah, the racial wealth gap is also incredible when you put it to numbers. So looking at the Forbes 400, there’s only seven members of the Forbes 400 who are African-American or Latino. Two African-American, five are Latino. If you were to add up the 100 wealthiest members of the Forbes 400, the 100 wealthiest Americans, none of which happen to be African-American or Latino, they own more wealth than the entire African-American population in this country. And as far as the Latino wealth, 186 members of the Forbes 400 own as much wealth as the entire Latino population in this country.
Looking at median wealth, so those right in the middle, those typical families we’re talking about, typical or median wealth for the African-American population is just $11,000. And for Latino population, it’s just a little over $13,000. So it’s a staggering gap between that and overall for the country, which is $81,000, not to mention this tiny subset of people who control a huge amount of wealth at the very top.
PERIES: And give us a sense of how much of this kind of activity that you describe as Facebook, Zuckerbergs do in terms of this sector. You know, they give away their money, it has tax benefits, there’s various kinds of ways in which they manipulate the system instead of just paying taxes. I mean, particularly when you take something like Facebook, because so many of us are engaged in it. We contribute to the wealth of the corporation in such significant ways, because it’s our data, our information, our photos out there. But at the end of the day it has no real societal benefits. Unless somebody like him chooses to do so, but that’s in order to evade taxes. How much of that kind of activity is actually going on among this 200 wealthiest families, or the Forbes 400 list?
HOXIE: So what I would say is that–I honestly have nothing against Mark Zuckerberg or Facebook. I use Facebook regularly. And I think he’s probably a genius for being able to take his ideas and create this empire that is around him. But what I would say is that he hasn’t done it on his own. He’s done it with significant benefits that have been provided to him and paid for by tax dollars. And some of those include things like the public schools that his employees have gone to, the roads and bridges that he travels on, the judicial system that protects his intellectual property. You know, just to name a few. So he is indebted to this country as much as anyone else. And therefore, you know, has–should be expected to pay his fair share of taxes.
Now, when we think about those at the very top, there’s a tremendous amount of tax evasion that takes place. Zuckerberg is one of the many people at the very top who use what we call billionaire loopholes in the tax code, one of which is called a GRAT, a grant to retain annuity trust. It’s very complicated, and it involves a lot of tax lawyers, the result of which is that you can shift money around without being subject to the gift tax or triggering the income tax or capital gains tax. Or the estate tax. Now, this is important because those at the very top can use it to hide incredible sums of money. Sheldon Adelson, who’s another member of the 20 wealthiest people in the United States, has avoided paying over $2 billion in taxes using just this one loophole in the tax code. So that’s remarkable within itself.
The other way that a lot of these people avoid paying taxes is through offshore tax shelters. We’ve heard a lot about corporations who are moving their headquarters overseas in order to, you know, hide their money in offshore tax shelters. What we haven’t talked as much about is individuals doing this. And what’s estimated by economists, the best one out there is this guy Gabriel Zucman, who wrote a book called The Hidden Wealth of Nations. He shows that over $7 trillion is being hidden in offshore tax shelters by–in individual assets. Private money.
So we know that’s not coming from, you know, the bottom half of the country, because they don’t have that kind of money, right. This is coming from those at the very top. And so our numbers, our best estimates of the wealth disparity are by definition underestimated because we can’t account for all of this hidden money in offshore tax shelters. And we also can’t account for the hidden money in this network of trusts that people use for tax evasion.
PERIES: Right. And give us a sense of what type of legislation or crackdown on this kind of activity could be made into policy or legislation that would help a better distribution of the income of, and wealth of the wealthy.
HOXIE: Right. So the first, I mean, an obvious one, and this should be simple, is just to close these loopholes. I mean, there’s no reason that we should have an army of accountants able to avoid the tax burden of the very, very wealthy. Those of us in the middle class and close to it don’t have these kind of loopholes to benefit from. So that’s just simple. That should be done today.
From there I’d say the most effective change in the tax code would be a direct tax on wealth. I ran the numbers on what if we were to just tax the Forbes 400 themselves. So a 1 percent wealth tax on just these 400 people, who by the way own over $1.7 billion each, the minimum that it takes to get into this small class of people, $1.7 billion. So a 1 percent tax on their cumulative wealth raises over $23 billion annually. If you were to target this same 1 percent wealth tax at the top 1 percent of wealth holders, who by the way, the top 1 percent own over 40 percent of the nation’s wealth today, which is about $26 trillion, with a T. So if you were to do a 1 percent wealth tax on the 1 percent, you’d be looking at trillions of dollars over ten years in tax revenue.
Now, this is incredibly important because you would be reducing wealth inequality at the very top. What would also help dramatically is investing this money in wealth-building opportunities for those at the bottom. Now, people are struggling to get ahead. They’re struggling to see a rise in their own personal net wealth. And that has a lot of reasons over the many years that we’ve seen this trend. But what’s clear is that more investments that help people get ahead, things like investments in higher education, eliminating student debt, things like housing, things like wealth-building, vehicles, and retirement, that helps people build savings, it helps people create wealth, and it helps create a safety net that currently doesn’t exist for millions of Americans.
PERIES: Josh, thank you so much for your report and doing this study. It’s enormously helpful for the rest of us on the bottom 50.
HOXIE: Thank you. Look forward to talking again soon.
PERIES: And thank you for joining us on the Real News Network.
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