Millionaires Group Says Unfair Tax System Undermines Democracy
Patriotic Millionaires Chairman Morris Pearl says decades of Republican efforts to make the tax system less fair could lead to a dystopian future of concentrated wealth and ineffectual democratic institutions
TAYA GRAHAM: If there is any idea that is more emblematic of the divide between the poor and the rich in this country, it is the role of the wealthy in politics and the policies that result from their influence. There is little doubt that the impact of billionaires like the Koch brothers on elections has spawned political power that has essentially undermined the fairness of our tax system. But not everyone is lockstep with their philosophy. In fact, there are people who are both wealthy and concerned that an inequitable tax system will undermine the country’s ability to provide essential services and, in some sense, undermine democracy itself. They call themselves Patriotic Millionaires, and it’s a group of wealthy Americans who say that giving them tax cuts is not a good policy.
Today we are joined by the group’s chairman of the board, Morris Pearl. Pearl retired after a long career on Wall Street to devote himself full time to the organization, where he continues to advocate for more equitable policies and against the corrupting influence of concentrated wealth. Mr. Pearl, thank you so much for joining me.
MORRIS PEARL: Great to be on your show, thank you. Our group was founded in 2010 by a bunch of us who got together to send a letter to President Obama, urging him to let the Bush tax cuts expire just for the top bracket. And of course, then he thought we were kind of dorks for attacking the left, he decided to compromise with Republicans. But over the next couple of years, they realized that we were actually helping them, giving them the political space to do what they actually wanted to do. And by April 15 of 2012, he invited us to stand on the podium with him when he gave his famous Buffett Rule speech, explaining that it just isn’t right that these wealthy people have lower tax rates than their assistants who actually have to work for a living.
TAYA GRAHAM: Now, in 2017, the Republicans passed a tax cut that primarily benefited the wealthiest Americans. As someone who benefited from it, what’s your perspective on it?
MORRIS PEARL: Well sure, I benefitted from it in the short-term impact on my personal finances, yes. The companies I invest in pay far less taxes and the value of the stock in my stock portfolio has gone up hugely. That’s fine for me in the short term, but I don’t want to live in the kind of country where there’s a few rich people and lots of poor people. The majority of Americans do not have any money to invest in the stock market anyway. The majority of Americans would have trouble paying a 500 dollar unexpected bill. So, saying that the rich people are getting richer and everyone else, whatever. That’s not the kind of country want to live in. I don’t want to live in a place with a few rich people living in walled compounds or something, which our country might come to after another generation like this. And that scares me. That’s not where I grew up, that’s not where I want my children to grow up.
TAYA GRAHAM: I have to say, it really amazes me that you are willing to go against what you consider your short-term interests. How many people are like you out there, how many Patriotic Millionaires are there?
MORRIS PEARL: Well, there’s hundreds of people in our group. We have a group of staff people in Washington, DC that’s helping our members put out this complaint about our current government, doing op-eds and talking to journalists, talking to people like you. And I’m hoping that we’ll find out, on November 6, the majority of Americans feel the way we do, the majority of Americans don’t want a society with gross inequality. I think that’s what we’re going to find out, I’m hoping.
TAYA GRAHAM: Well, it sounds to me like you’re saying that these short-term gains for the incredibly wealthy have long-term consequences. So, what are you saying is at stake here? What kind of inequity do you see our country facing, let’s say 20 years from now, if these tax laws aren’t changed?
MORRIS PEARL: Well, no country has ever succeeded with the few rich getting richer and richer and richer, there’s lots of other people being poor. They tried that in France you know a few hundred years ago and they ended up executing their rich people. They tried that in South Africa during my lifetime and that ended up working out fairly poorly for the Afrikaners, who were the rich white people. And I don’t see social unrest quite yet, but I think we’re moving in that direction. I think as Thomas Piketty told us, that it’s almost inevitable that when people can get a return on capital, when capital is paying more than working for a living, then inevitably, we’ll get more inequality because the rich people will continue getting richer and richer and richer, and leaving the rest of the people behind. And that’s just not going to work in the long-term.
TAYA GRAHAM: So, one thing that people like Warren Buffett have inveighed against is generational wealth. He fears that will create a sort of American aristocracy. And part of preventing that is a robust estate tax, which of course has been weakened considerably in the latest tax law. What’s your take on this?
MORRIS PEARL: Yes, he’s right. Look at the list from Forbes of the richest people in the country. Eight of the top couple dozen are people who have simply inherited wealth, the heirs to Sam Walton, who started Wal-Mart, and heirs to Forrest Mars, who started Mars candy. And those are people who don’t pay taxes at all because they don’t have any income. Those are people who don’t pay capital gains tax because by American law, they only pay tax on the increase in wealth after their patriarch died. And other than the estate taxes, there’s essentially no tax at all.
And yeah, it does lead to an aristocracy. And I think some people think that’s a good thing. “Oh, if I get really rich and start a rich business, my family descendants from now to forever should be able to live well.” But that’s not … I mean, I think everyone should be able to live well and be rich. I’m all for it. But I think that everyone should have the same kind of fair chance. I think that people who get money without working should pay the same tax rates that people who pay money by working get. I think people should pay on their inheritances the same kind of taxes they pay on all the other regular income that working people get by working.
TAYA GRAHAM: Absolutely. Now, could the estate tax be a way to mitigate wealth inequality in the U.S.? Could it have that kind of impact?
MORRIS PEARL: It could, if people actually paid it. What we have is a system where, first of all, tens of millions of dollars go from generation to generation without any estate tax at all. And secondly, we have the stepped up basis rules that allow heirs of these fortunes to sell in bits by bits the companies their forefathers made without even paying capital gains tax either. So, yeah. It could work that way, but it doesn’t generally. We saw in the newspapers just the other day how the Trump family evaded the estate tax by having Donald Trump’s company overcharge Fred Trump’s company for all kinds of things, and therefore sort of transferring the real wealth of the family made by Fred Trump to Donald Trump. He didn’t get rich by being a smart business person. He got rich by taking his father’s money, which is fine too. But he should pay income tax on it like all the rest of the people who work for a living do.
TAYA GRAHAM: It seems like recently the IRS has been weakened. Do you think the IRS even has the power now to enforce these types of tax laws on our super rich?
MORRIS PEARL: Not really. I mean, I think that’s part of the Republican philosophy, is to get people to understand that the rich people don’t pay taxes. Donald Trump isn’t ashamed of cheating on his taxes. They’re actually bragging about it. I think what they want to do is convince all the middle class Americans that rich people don’t pay taxes, so you shouldn’t either. And you should tell your state legislators and your mayors and your city council people that they have to get rid of all the taxes because it’s not fair that only middle class people pay taxes. Really, the real solution is to have the rich people pay their fair share.
TAYA GRAHAM: Now, some states have experimented with a millionaire’s tax. What do you think of this idea?
MORRIS PEARL: I think that tax rates should be progressive. I think that people with higher incomes should pay higher tax rates. I mean, currently, we have tax rates for working people that run from 10 percent to 30 something percent, and for capital gains, run from zero to 20 percent. First of all, working people should have a zero percent bracket too. But besides that, I think it should be more progressive. We had a great country back in the 1950s, and when Donald Trump talks about making America great again, I think he needs to bring back segregation. What we actually had was people paying their fair share of taxes.
The guys who started Home Depot, who are now complaining about taxes, paid 70 percent on income of over 100 thousand dollars a year when they started that company, and they’re now going around complaining about their current tax rates, which is about half of that. We had building interstate highway systems and sending men to the moon and doing all kinds of amazing things when poor people pay no taxes at all and rich people paid 50, 60 and 70 percent of their income in taxes. That’s when America was great, and that’s why. It wasn’t because we let bigots run wild and harass people.
TAYA GRAHAM: Now, when you mention that, you mentioned these incredible social engineering projects, sending people to the moon, just these incredible projects that are able to be accomplished when everyone pays their fair share of taxes. Do you think in our current political climate we will actually find a Congress or House of Representatives that has the political will to make this possible?
MORRIS PEARL: Well, I’m hoping that a few months from now, in January 3, that we’re in a different political climate than we are now. I think the way to change the rules is to change the people who make the rules and change the face of the people banging of the gavels. So, yeah. I’m hoping we’re in a different political climate. I’m hoping we’re in a political climate where there are a group of elected officials, legislators who do want to make our country more progressive and try to have people who are financially challenged having enough money to participate in the economy and participate in civic life and buy stuff. Our members got rich selling expensive ice cream to people and selling expensive shoes to people.
And poor people aren’t buying those. It’s middle class people, people who have enough money to pay for stuff, that are helping the rich people, the business people in this country, get rich. I mean, there are a few exceptions. There are some people that extract minerals from the earth and coal and oil, and those people don’t depend on consumers. But most businesses in this country depend on people buying stuff and they depend on people having enough money to buy stuff. Talk to your local bar owner. He’s a lot more concerned about how much beer money all the people in the bar have on Friday nights than about the wages of the one guy standing behind the bar pouring the pitchers.
TAYA GRAHAM: It’s interesting, because you describe income inequality as something that would actually affect long-term wealth for people who sell to consumers. Let me ask you just one last question, let’s have you look into the future. And let’s say the Republican stranglehold on the Congress doesn’t change anytime soon. What kind of long-term impact are we looking at if this kind of income inequality gets worse?
MORRIS PEARL: I think in another generation we’re looking at something out of one of those dystopian novels where there’s a few rich people living in compounds behind high walls and being driven around in armored cars. It’s kind of like, I once went on a vacation to some Caribbean island after hurricane and it wasn’t even fun for my family and I doing that. And I don’t want America to be like that. I want to have my children and my grandchildren grow up in the kind of country where I grew up, where everybody has a chance to succeed and everybody is doing alright.
TAYA GRAHAM: Well, I certainly hope the horrifying vision of the future that you have predicted doesn’t come to pass, and instead we’re able to see some of that equality giving back to the taxpayers and people being made to pay their fair share. And I want to thank you so much for being one of the Patriotic Millionaires and joining me today. I want to thank my guest, Morris Pearl, for joining me. He is the chairman of the board of for Patriotic Millionaires. And I want to thank you for joining me, Taya Graham, at The Real News Network.