Blowback: Is the Stinginess of Billionaires Helping Make the Case for a Wealth Tax?

Last month, Gabriel Zucman—professor of economics at UC Berkeley, and one of the chief architects of Elizabeth Warren’s wealth tax plan—fired off a series of tweets that positioned the wealth tax in response to the lack of charitable giving by U.S. billionaires.

Zucman wrote: “Annual charitable giving of the top 20 richest Americans: $8.7 billion. Annual revenue from a 6% wealth tax on the top 20 richest Americans: $60 billion.” And he quickly followed that up with: “Total charitable giving in the U.S. (itemized on tax returns) in 2017: $269 billion, or 0.33 percent of household wealth. Charitable giving by the top 20 billionaires excluding Gates and Buffett: 0.32 percent of wealth. They give less, relative to their wealth, than the average American.”

Zucman’s point is simple enough: In light of the fact that billionaires aren’t giving their money away, why not tax these vast fortunes to improve society? It’s an interesting perspective, and one worth exploring further.

Stockpiling Wealth

Zucman is right about the paltry giving of the super-rich. As we’ve covered many times in the past, the wealth of billionaires continues to grow, far outstripping any rise in their giving. The personal wealth of the Forbes 400 increased from $1.27 trillion, or 2.7 percent of total U.S. wealth in 2009, to $2.96 trillion, or 3.3 percent of total U.S. wealth in 2019. That’s a 133 percent 10-year growth rate. Pretty eye-opening, especially considering that many of those billionaires are signatories of the Giving Pledge, and have publicly committed to giving away the majority of their fortunes.

It’s worth asking if the rise in billionaire wealth, coupled with their low rates of charitable giving, correlates with the wealth tax’s emergence as a Democratic policy idea. Zucman alluded to that very possibility, telling me that in light of the lack of more giving by the ultra-wealthy, “it is perhaps not too surprising to see a demand for wealth taxation.”

Zucman underscored his point on Twitter by sharing the below graph:

Now, we can’t share this graph without pointing out a few issues with the data. First, some giving is done anonymously, which precludes anyone from knowing exactly how much charitable giving the ultra-wealthy are engaging in. For example, the chart shows Laurene Powell Jobs giving away just 0.1 of her wealth when, in fact, there’s no reliable public data on this very private mega-giver. Or consider billionaire Jim Simons. Until the New York Times reported on a hidden offshore foundation with $8 billion in assets, no one outside of Simons’ inner circle knew of its existence.

Furthermore, charitable giving is often lumpy; givers may offer up a major donation one year, then relax their giving during subsequent years. That largesse won’t show up in a single year’s data. There’s also the question of why Zucman is comparing charitable giving to wealth in the first place, as opposed to annual income, since wealth is often illiquid and therefore difficult to dispose of.

All of that aside, there is no denying that the charitable giving of the ultra-wealthy is not keeping up with their exploding fortunes. As we covered in detail here, a recent study by the Bridgespan Group found that in 2017, ultra-wealthy U.S. families donated just 1.7 percent of their assets to charity. That figure is much higher than Zucman’s .8 percent for the top 20 on the Forbes 400 list, but still not high enough to put a dent in their growing wealth. Clearly, billionaires aren’t giving away as much as they could or probably should. And they are hoarding ever larger fortunes, even as they face growing criticism. Zucman’s tweets crystallize an emerging sociopolitical zeitgeist that’s been termed “The War on Billionaires.”

Heading Off a Wealth Tax

In public statements, neither Elizabeth Warren nor Bernie Sanders have linked their calls for a wealth tax to low levels of philanthropic giving by the ultra-wealthy. Not yet, anyway. But it seems likely that we’ll be hearing more arguments along these lines as debate over a wealth tax heats up. In turn, you’d think that this kind of talk might prod the billionaire class to step up their giving.

I asked Paul Schervish, professor of sociology and director of the Center on Wealth and Philanthropy at Boston College, if talk of a wealth tax and other symptoms of an anti-billionaire backlash have seeped into the conversations he’s been having with his ultra-wealthy clientele. (Schervish consults on planned giving initiatives.) He affirmed that those conversations are, indeed, happening, yet not with any anxiety or hesitation on the part of his clients. “The billionaire class isn’t worried about what their critics say,” Schervish told me. “Billionaires don’t care much about the sound and the fury of the media. Their giving is charted out at a level of sophistication way beyond what either one of us understands.”

While it might seem that a wealth tax could derail such careful planning, Schervish argued that wealth-holders around the world have managed to circumvent wealth taxes with near complete success. That is why the majority of nations that have imposed a wealth tax have since rescinded it, he said. (Other experts disagree, saying that a wealth tax could actually bring in vast new revenues.)

What’s received far less attention so far is how such a levy might affect charitable giving. When I asked Gabriel Zucman about this point, he responded: “It is hard to predict. What is clear, however, is that a wealth tax would collect much more revenue than what billionaires currently give to charities.” This does seem like a safe bet, since even if Warren’s proposed 6 percent wealth tax yielded only half the revenue she projects, that would still be a lot more money than what billionaires currently give away.

Not only would a wealth tax shake loose new money for public investment, said Zucman, but it would do so in a way that puts citizens in charge of shaping priorities—as opposed to top philanthropists. “Education, health and infrastructure all improve well-being and are key to prosperity,” he said. “As a society, we believe that spending on these public goods is better decided through democratic deliberation than just by a few billionaires (which is oligarchy, not democracy).”

To recap, Zucman is making two arguments about the wealth tax vis-a-vis philanthropy: first, that such a tax is a more effective means of tapping into the excess capital accumulated by the super-rich, since voluntary redistribution isn’t happening at scale; and second, that it’s a better way to deploy this wealth, one that’s more in line with U.S. democratic values.

Be Careful What You Wish For?

Both these points are being made with increasing regularity amid the growing billionaire backlash. Yet even as many progressives nod their heads in agreement, especially about the second point—that private givers shouldn’t set society’s priorities—some of these folks might have second thoughts down the line, given that shifting more wealth to government could dramatically weaken civil society.

In his book “The Givers,” Inside Philanthropy editor David Callahan offers numerous examples of how wealthy donors have used their wealth to advance social justice, offset corporate power and address problems where government attention is either deficient or nonexistent. Even philanthropy critic Rob Reich argues in his book “Just Giving”—which we cover here—that philanthropy plays an important and legitimate role in tackling certain challenges where the public sector falls short.

Meanwhile, it’s hardly a secret that the American public has little faith in government’s capacity to solve problems and has doubts about how accountable the public sector really is—a point that Schervish brought up. In theory, citizens have oversight over federal tax dollars through their representatives. In practice, special interest power and other political dynamics distort how our tax dollars are spent in undemocratic ways. As Schervish points out, “the line ‘it’s easier to make money intelligently than it is to give it away intelligently’ also applies to taxation. It’s easier to raise money intelligently than it is to spend the money intelligently.”

The counternarratives adopted by Schervish and Zucman highlight the contours of a growing debate over wealth and philanthropy. The billionaire class is holding onto excess assets—of that, there is no disagreement. The question is, do we want those billionaires to be able to disburse the money as they see fit, or should government step in and do it for them? As Zucman asserts, government spending is decidedly more democratic than billionaire giving. Yet Schervish and others contend that government is inherently inefficient and also not good at doing certain things, which is why we need billionaire funders to step in and solve the problems that government can’t address.

All these issues deserve more in-depth attention. Stay tuned, because we at Inside Philanthropy are preparing a deeper dive into this very subject.

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