and Social Security
Billionaires have formidable resources— economic assets, expertise,
personal networks, high social standing— which, if they wish, they
can deploy in attempts to influence public policy.1 Such high- profile, politically engaged billionaires as Michael Bloomberg, Warren Buffett, Sheldon Adelson, the Koch brothers, George Soros, and Donald Trump may
create the impression that US billionaires are highly active in politics, outspoken about the issues, and— perhaps most crucially— ideologically di-
verse and balanced. Are those billionaires typical or anomalous? What do
the very wealthiest Americans as a group actually say and do about public policy?
As we describe and analyze the political words and deeds of billion-
aires over the next several chapters, we seek to answer a number of ques-
tions about the one hundred wealthiest US billionaires. Do most of them
speak out frequently about public issues? Do they try to convince their
fellow citizens that particular policies would be good or bad for the public interest? Do they make financial or organizational contributions to policy-related causes, or do they limit themselves to contributing to political
parties and candidates? Is there harmony between their political speech
and their financial efforts? Do their policy preferences vary widely, or do they tend to share the same— perhaps right- leaning— perspectives? Does
their behavior vary according to the nature of the policies they favor? Their level of wealth? The source of their wealth (for example, inheritance or
entrepreneurship, high or low exposure to consumers)?
For the most part, previous research has offered only fragmentary or
anecdotal answers to these questions. Yet the questions are weighty. The
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answers have a bearing on democratic theory and practice. If billionaires in fact exert substantial influence on public policy, it seems possible that they might exert a kind of benevolent political leadership, leadership based on superior knowledge, expertise, and economic success. On the other hand—
especially if they pursue narrowly self- interested policies that are opposed by most Americans— any special influence that billionaires wield might be seen as harmful, violating democratic norms of political equality.
We focus on a closely related issue: the political accountability of billionaires to the citizenry as a whole. Do politically active billionaires openly engage in public deliberation, so that members of the public can judge the reasoning behind their stands, accept persuasive arguments but reject un-convincing ones, and hold them responsible for their political actions? Or do some billionaires act quietly— even secretly— to push policy in directions opposed by most citizens without exposing themselves to judgment
or debate?
In this chapter we examine billionaires’ words and actions concerning
federal government policies related to two of the most consequential and
widely discussed economic issue areas in American politics: taxation and
Social Security. We use web- scraping techniques and publicly available
data on financial contributions to analyze everything that the one hundred wealthiest Americans— the top one- quarter of Forbes’s 400- wealthiest list— publicly said or did about various aspects of policies related to taxes or Social Security over a rather lengthy period: roughly ten years.2
We have found substantial evidence of stealth politics. On these issues, many billionaires have engaged in extensive political actions that aim to move public policy in directions that most Americans oppose. But they
have rarely made serious political arguments in public or offered reasons for their actions. Most billionaires have said nothing at all about specific policies involving taxes or Social Security, particularly when their preferences are much more conservative than those of the general public. Many
act, but very few explain why. They do not try to convince their fellow citizens to agree with them. They avoid accountability.
Taxes and Social Security
We began our analyses of billionaires’ political words and actions with
taxes and Social Security because of the great importance of those policy areas.
stealth politics on taxes and social security
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Taxes
Taxes provide most of the enormous amount of money (about $3.85 trillion in 2016 outlays) that the federal government spends on the whole array of domestic and foreign policies that it pursues.3 The overall level of tax rates and the amount of revenue they yield have important effects on
how much money is available to spend. That affects what the government
can or cannot do: what we can or cannot “afford to do,” as politicians like to say. The US government could do much more than it currently does if
our tax revenues per person— below the Organisation for Economic Co-
operation and Development (OECD) average and much lower than in
most of the wealthiest countries4— were set significantly higher.5 Tax cuts, on the other hand, generally reduce the amount of money that is available to spend on public goods and social programs.
The level of tax rates also affects “fiscal” policy— the balance or imbalance between revenue and spending (that is, the size of budget deficits or surpluses), which in turn leads to increases or decreases in the national debt and to possible effects on inflation and the rate of economic growth.
Choices among taxes as sources of government revenue, and decisions about exactly how each tax works, also have important effects. For example, reliance on different kinds of taxes or different rate structures can affect the extent of economic inequality in the country. When the federal income tax is made more progressive (i.e., when marginal tax rates on higher- income people are raised, or rates on lower- income people are lowered) or when average rates of a progressive income tax are raised
so that that tax produces a larger share of federal government revenue,
inequality in posttax incomes is reduced. On the other hand, when top-
bracket income tax rates are cut, or the overall amount of revenue that comes from progressive income taxes is reduced— as was the case with
large tax cuts made under Presidents Ronald Reagan, George W. Bush,
and Donald Trump— economic inequality is increased. Relative to middle-
income and lower- income Americans— and in absolute terms as well—
the rich get richer.6
The federal estate tax has perhaps the most highly progressive structure of any US tax. It does not apply at all (as of 2017) to estates that are worth less than $5.49 million at the time of an individual’s death. (In effect, the tax actually starts at double that level— $10.98 million— for couples.)7 So the estates of the vast majority of Americans, about 99.8 percent of them, owe nothing at all at death.8 For those who do pay the estate tax, official
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rates look fairly high— 40 percent on the portion of estates that exceeds the starting threshold by more than $1 million. At relatively low levels of wealth, however, the effective rates on whole estates are much lower. The estimated effective estate tax rate for 2017 began at an average of just
8.8 percent for estates worth between $5 and $10 million and rose to an
average of 19.8 percent for estates worth more than $20 million, coming
out to an overall average of approximately 17 percent.9
For billionaires, though— at least for those who do not pursue tax avoid-
ance schemes or who, unlike Warren Buffett or Bill Gates, do not give a
substantial part of their wealth to philanthropy— the effective rate is closer to 40 percent. That can be a lot of money. The heirs to an estate worth $1 billion might have to pay nearly $400,000,000 in estate taxes. The
y might not like that one bit. For society as a whole, on the other hand, such a levy would produce a substantial amount of money to fund government programs and
might cause a meaningful reduction in wealth inequality. Any increase in estate tax rates— especially at the top— would further reduce inequality. On the other hand, cuts in the estate tax— like those of 1997 and 2001— tend to increase inequality of wealth and income. As we will see, a favorite policy proposal of a number of billionaires is to abolish estate taxes entirely.
Very different is the payroll tax associated with Social Security. That tax is very regressive.10 A lower- income working person pays a rather high proportion of his or her income in payroll taxes: a substantial 15.3 percent of all wages.11 That is a much higher rate than a more- affluent person
pays.12 In fact, someone with $1.4 million dollars in wage and salary in-
come owes only about one percent of that amount in Social Security payroll taxes.
How can that be? Mainly because the Social Security payroll tax is a
flat- rate tax but is applied only to relatively low amounts of income.
The Social Security payroll tax takes the same percentage— 12.4 per-
cent— of wages or salaries from most working people, which on the face
of it may seem fair. Moreover, half of the tax is essentially invisible, because it is nominally paid by employers and does not appear on workers’
pay slips. (Nearly all economists agree that the “employer’s share” is actually paid by workers; it is subtracted from the wages they would otherwise get.) So most Americans think of payroll taxes as “fair” taxes, and most
favor using such taxes— and similarly regressive sales taxes— as major
sources of revenue.13
But the apparent fairness of these taxes is largely illusory. The fair- at-first- glance flat rate, and the (deliberate?) obscurity about the “employer’s
stealth politics on taxes and social security
29
share” do not tell the whole story. Especially important is the rather low
“cap”— just $118,500 in 2016 — on how much in wages and salaries is
taxed at all. Any money earned above that $118,500 cap is not subject to
the tax. So a person with anything up to $118,500 in wages or salary pays fully 12.4 percent of his or her income. But for someone who earns twice
the cap amount, only half of his or her earnings are taxed, so that the tax rate on that person’s total earnings is cut in half— to just 6.2 percent of earnings. A person who makes four times the amount of the cap pays just
3.1 percent of total earnings. And so on up the income scale. A billionaire with annual income of (say) $50 million would pay a mere 0.03 percent of
it in Social Security payroll taxes. Hardly enough to notice.14
So Social Security payroll taxes are extremely regressive. Cuts in those
taxes would increase the progressivity of the overall tax system. They
would also tend to stimulate the economy, since lower- income people tend to spend rather than save the money from tax cuts. (Most have to spend
the money on things like food, clothing, rent, and medical bills.) Tempo-
rary cuts in payroll taxes have sometimes been made, as in the 2009 stim-
ulus that was designed to help the economy recover from the financial
crash and Great Recession of 2008– 2009. Historically, however, payroll
taxes have more often been raised, making our tax system more regressive— particularly when progressive income taxes have been cut at the
same time.
Social Security
Social Security— more precisely called Old Age, Survivors, and Disability Insurance (OASDI)— is the largest and arguably the most efficient and
most effective domestic program of the US federal government. In 2016,
spending for Social Security amounted to about $910 billion, 23 percent
of total government outlays.15 (Only Medicare and Medicaid health- care
spending, taken together, come close in size.) Administrative costs of en-rolling beneficiaries, calculating benefits, sending out checks, and dealing with problems are very low: roughly 1 percent of the money.
Social Security pays out retirement benefits to some fifty million se-
niors every month.16 For about 61 percent of those people, Social Security provides at least half— and in many cases all— of their income.17 For that reason, Social Security has had a major effect in lowering the once- high poverty rate among elderly Americans, from around 50 percent prior to
its creation during the Great Depression, down to 35 percent in 1960, and
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to just 8.8 percent in 2015 as real Social Security spending per capita increased.18 The program also provides important benefits for “survivors”—
widows or widowers who have lost income formerly provided by a de-
ceased spouse— and for disabled Americans.
Most Americans strongly support the Social Security program. Year
after year, surveys regularly show that large pluralities favor expanding the program. A fair number of people are content keeping benefits as they are, but only tiny minorities favor cuts. Majorities of Americans oppose
Social Security cuts of practically any sort, including reductions in annual cost- of- living adjustments or increases in the retirement age.19
But even though Social Security reduces overall inequality and is
highly popular with most Americans, its very substantial budget makes
it a tempting target for those who want to shrink the size of government
or are looking for savings to offset large high- end tax cuts. This potential conflict makes Social Security— along with tax policy— an issue on which
there may be a great deal of tension between billionaires’ self- interest, on the one hand, and the needs and wishes of most ordinary Americans, on
the other.
The Logic of Stealth Politics
Recent evidence indicates that affluent Americans have more influence
on policy making than their less- affluent fellow citizens.20 And their policy preferences tend to differ significantly from those of other citizens. Data from many national surveys, for example, reveal that the top one- fifth or so of US income earners— who can be called “the affluent”— tend to be
less supportive than the nonaffluent of social welfare spending programs, progressive taxes, and economic regulation.21
The SESA study of a small but statistically representative sample of
the top one to two percent of Chicago- area wealth holders (“multimillionaires”) found similar— but considerably sharper— differences between
the policy preferences of the truly wealthy and those of average citizens.22
It seems reasonable to suspect that billionaires, too, have substantial political clout (perhaps more clout) and hold policy preferences that are
quite different (perhaps even more different) from those of most Ameri-
cans. Billionaires’ wealth is far greater than that of mere one- percenters.
It now takes only about $10 million in net worth to make it into the top
one percent of US wealth holders.23 The least wealthy billionaire, with
stealth politics on taxes and social security
31
just one billion (1,000 million) dollars, has about one hundred times the wealth of the least wealthy one- percenter.24
This likely combination of having substantial political influence and
having policy preferences that diverge from those of the public suggests
that many billionaires may prefer to take quiet rather than noisy political action. Why open oneself to criticism? Why arouse public opposition or
counteraction?
A quiet political strategy might seem particularly appealing to bill
ion-
aires who hold views clearly at odds with those of the average American.
Those with more mainstream views, on the other hand, might tend to speak
out more forthrightly. The beneficiaries of inherited wealth, too— some
of whom may feel shy about their exalted (but in some people’s view per-
haps unmerited) positions in society, and who as a group are less open to new experience, less extroverted, and less risk acceptant than their more entrepreneurial peers25— may prefer to take political action without much fuss. Billionaires whose businesses are particularly vulnerable to consumer pressure— to public condemnation, whispering campaigns, even boycotts—
may also prefer to keep any political activity that they engage in rather quiet.
This line of reasoning assumes that billionaires have a choice— that they can be quiet if they want to, or speak out on issues if they wish. Silence is not particularly problematic: if a person simply says nothing whatsoever
about political issues, nothing much is likely to get into public print, video, or cyberspace. For billionaires, speaking out is also unlikely to be difficult.
In every community (even Manhattan), local billionaires are likely to be
major figures whose words and actions are of great interest. What journalist or blogger would turn down the chance to interview a billionaire? Any billionaire who wants to speak out on public issues, we believe, is very
likely to be offered many bully pulpits from which to do so. Furthermore, if for some reason a billionaire were consistently shunned by the media,
he or she could simply purchase an established media company. (Billion aire Amazon CEO Jeff Bezos— though hardly shunned— bought the Washington Post in 2013 for a sum equivalent to less than one percent of his net worth.)26 Or a billionaire could found a new media company to serve as
a mouthpiece.
All in all, if a billionaire does not speak out in public about an impor-
tant issue, his or her silence can reasonably be treated as reflecting a deliberate decision.
When we began our research, we expected that unwillingness to of-
fend others would motivate many or most billionaires to not to speak out
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frequently in public about policy issues, even on very important issues
Billionaires and Stealth Politics Page 5