Could a tax on billionaires solve California's inequality crisis?

0:00Support for Here and Now Anytime comes from MathWorks, creator of MATLAB and Simulink software for technical computing and model based design. MathWorks, accelerating the pace of discovery in engineering and science. Learn more at MathWorks.com. WBUR Podcasts. Boston. It's incredible that Donald Trump continues to put forth this lie to the American people that the affordability crisis in this country is a hoax or some type of democratic scam. It's very real. Voters tell pollsters they're struggling to pay for basic needs. Politicians from both parties are talking a lot about affordability, but not everyone is staying on message.

0:53It's Wednesday, December 10th, and this is Here and Now Anytime from NPR and WBR. I'm Chris Bentley.

1:03Today on the show, affordability is admittedly a kind of clunky word for something everybody pretty much understands. Things are getting too expensive for a lot of people. We've got a few conversations about that today and how the political system is sort of responding to what many voters are increasingly recognizing as a crisis. In a few minutes, we'll hear about a bill in California that would tax billionaires based not on what they make in income, but on what they own. Mark Zuckerberg only receives a dollar in salaries, but he has a substantial amount of wealth accumulated. Would a wealth tax work?

1:41And could it pass?

1:47But first, we heard the Democratic House Minority Leader Hakeem Jeffries at the top of the show a minute ago, reacting this morning to what was supposed to be the launch of President Trump's affordability tour last night in Pennsylvania. Admittedly, Trump's strength has never been staying on message. But during the speech last night, his tangents included a tirade against Minnesota Congresswoman Ilhan Omar. He also complained about the US taking in immigrants from, quote, hell holes like Afghanistan, Haiti and Somalia, which he called filthy, dirty, disgusting, and ridden with crime. But there was some talk of affordability.

2:26Matt Weiser, White House bureau chief of the Washington Post, was there, and he talked about it with Robin Young. Just setting the scene a little bit, there was about over a thousand people, a pretty raucous crowd at one point chanting four more years. And Trump was sort of designed to focus on the economy. me. He had charts that he was reading from and bar graphs, and there were signs all over the place that said lower prices, bigger paycheck. But he frequently veered way off script. He talked about Americans using too many pencils, having too many dolls. He disparaged Somalia. The concept of climate change made fun of the news media.

3:10I need to go back to the dolls because the president resurrected this. He said it before. He said, you always need steel. You don't need 37 dolls for your daughter. I don't know anyone who has 37 dolls. And I'm not sure anyone in the crowd, many working class would get that reference. But we understand the reference to pencils had to do, Americans needing fewer pencils, had to do with the fact that China is providing pencils to its workers or something? Yeah, and he used the number 37 to describe that too. So that number seemed to be in his head. Although back in, I think it was March when he had an interview with NBC News and made similar comments about both pencils and dolls, you know, in a little bit of a discordant way to sort of tell Americans they don't need things in abundance.

4:04And that certainly is against the message of much of his political persona of a billionaire who's going to deliver riches to all Americans. So you could buy as many pencils as you might want or as many dolls as you might want. And instead, he's sort of telling people to restrict their ambitions and what they might purchase. It's this brilliant, some would say, way the president have is combining, well, listen, combining something he's about to say about 401ks with telling people also, as if we were during the Depression, not to have pencils. So let's listen to some of what he said. We're getting inflation.

4:43We're crushing it. And you're getting much higher wages. I mean, the only thing that's really going up big, it's called the stock market and your 401ks. It's going up. But you know, Matt, I'm thinking many people in Donald Trump's base, many working class people don't have 401ks. But then in a poll from Politico this week, we have to say, found nearly half of Americans surveyed said they had trouble affording groceries, utility bills, health care, housing and transportation. So they're not feeling that rise in their 401ks. But do you think Donald Trump was off message or somehow and, you know, much of the media is saying that, much of the talking heads are saying that or somehow oddly on it?

5:29I mean, we've seen this so often throughout his political career where his advisors try to sort of corral him and put some guardrails and head him in a direction that they think is politically wise. And he often ignores that and goes to his gut. And that's sort of what we saw last night. I mean, the stage was set for him to speak about certain things and he didn't, And he sort of veered off course. And a lot of times he's been proven right over political pundits in his career. And that's the lessons that he draws. But in this case, I think his message was a little bit discordant. You know, Robin, in the hours before this, I went to a grocery store and to the casino floor where Trump was speaking at this resort to talk to people.

6:18And a lot of people were counting their pennies. They were changing their budgets. They talked about the cost of energy and the cost of groceries. At the penny slots, people were self-admittedly down on their luck. So those are not the people who are necessarily benefiting and looking at their 401ks and the stock market and feeling good. Well, what did they say afterwards? What did people tell you about his message? I think the general gist from the crowd was they liked it. They like Trump. They like sort of the rollicking nature of some of his rallies. And they don't necessarily blame him yet, at least his supporters.

7:01I mean, the people that I talked to who weren't necessarily at the rally, some of them are blaming him. They don't think he's paying attention. But at least in the crowd, I think there was like an entertainment aspect to his rallies as we often see. Well, I loved a quote that you had from an admirer of Donald Trump's who said, and this is a retired banker, you know, who told you about his purchases being more expensive. He said, well, Trump's very optimistic. He's a salesman. When the sky is literally falling, they say it's OK. They're going to pick it back up. He might like hearing that. But then he went on to say, but he has a lot of work to do.

7:40Matt Weiser, White House Bureau Chief with The Washington Post. Thank you so much. Thanks so much, Robin.

7:50Coming up next, at the same time rising costs are squeezing budgets for working people, the mega-rich are getting richer. The U.S. has more than 900 billionaires. And according to a recent report by UBS Global Wealth Management, their wealth grew by 18 % this year. No wonder more states are considering raising taxes on the very rich. Robin Young has a look at how that might work and why it's more complicated than it sounds after this break. Thank you.

8:52Licensed agents will compare policies from trusted, top-rated insurance companies to find you the best fit for your health, your lifestyle, and your budget. And they work for you for free. Get the right life insurance for you and save more than 50 % at selectquote.com slash anytime. That's 50 % off at selectquote.com slash anytime. Talk about a wealth tax is back, maybe because of the stunning increase in unaffordability and inequity. Oxfam reported on the work of three French economists who found that around the world, the top 1 % of people own about 43%, almost half of the world's total wealth.

9:32Could a wealth tax spread that around a little? Now, most of us are taxed on paychecks, what we make. A wealth tax is the concept of taxing billionaires on what they own, which might include a few Picassos and an NBA team. Patricia Cohn of the New York Times reports that Norway, Switzerland, and Spain already have wealth taxes, Bolivia has an impuesto a las grandes fortunas, or tax on grand fortunes. There are heated debates in France, and in Britain, one survey shows 75 % of people in the UK support this idea. Well, here at home, California recently proposed a billionaire tax act, a one-time 5 % tax on the worth of California's billionaires to pay for health care and education in the state.

10:14They can exclude retirement accounts and up to$5 million in assets like cars and expensive handbags. But what are the pros and cons? Christina Llewellyn is a professor at the Poole College of Management at North Carolina State University. Among her recent articles on the university's website is the pros and cons of wealth taxes. That works out well for us. Professor Llewellyn, Christina, welcome. Thank you so much. I'm really happy to be here, and thank you for having me. Yeah, just what we're looking for. So a quick example, which you outline, NBA player LeBron James made over$47 million in the 24-25 season and was taxed at 37 % on most of his income.

10:54But then you give the example of Mark Zuckerberg, controlling shareholder of Meta. Right, exactly. So Mark Zuckerberg, he only receives a dollar in salaries, but he has a substantial amount of wealth accumulated. So if we impose a 5 % tax on that, it would generate a substantial amount of revenue. He does have$209.4 billion. Worth remembering, every one of those billions is$1 ,000 million. And then this proposed 5 % wealth tax for him would be just$10 billion off$209 billion. And someone said, well, that's not going to hurt. But the issue with this is really just because he has this wealth doesn't mean that he has the amount of money laying around to pay this tax.

11:32Many wealthy people, their money is tied up in their assets, so they don't necessarily keep a lot of cash laying around. They invest it in other sources of wealth that can help generate more investment income. What might the solution there be? A different solution could be to tax the investment income at a higher tax rate. If he receives dividends or capital gains on stock that he does sell, we could tax that at a higher rate. But some have suggested, well, you know, some of these billionaires we're talking about maybe have 11 houses in one case. Couldn't they sell off some of their assets or would that be seen as being unfair?

12:05Yes, and that's a great point. So normally when we think about tax policy principles, one thing that we don't want to do is cause taxpayers to make decisions that they wouldn't otherwise do just because a tax is imposed. So that's normally thought of as kind of a bad tax policy. Well, I think this brings us to unrealized gains. You mentioned Zuckerberg and others in the short term. They get dividends, the cash back from investments. Those are taxed and realized. Unrealized gains are the increase in value of investments on paper. You know, this value doesn't trigger taxes until those investments are sold.

12:38And there's a suggestion to tax this increase in value before sale in the increase in other assets as well. That's true. Yeah, I think wealth does come from increasing value and the value does increase over time. So do we tax the changes in value over time or do we just tax them when somebody cashes in on an investment? For example, if we have a sports team or some sort of intangible or something else that's increasing in value over time, then we have to borrow money or we have to sell off an asset to be able to pay for that. Well, but isn't this what very, very wealthy people do? They often buy things like a sports team.

13:15Right. And borrow against it. Right. Exactly. And I guess if you already have a loan, for example, if you did take out a loan to buy a sports team and it's already leveraged, then you have to either leverage another asset to be able to potentially borrow money to pay that tax. But what are supporters saying about this one-time tax, again, on billionaires? There's over 3 ,000 around the world. There are a number of reasons why people are imposing these. And from a sufficiency of revenue perspective, this is a great opportunity to help reduce federal deficits and bring in additional revenue, just like in California, to help pay for health care costs.

13:49These types of tax proposals are also kind of politically appealing because they do apply to a fairly small number of individuals, yet they have the potential to bring in quite a bit of revenue. Kind of a third thing is that policymakers can use taxes as a way to redistribute wealth a little bit. And this can help with the wealth inequality situation that's become more substantial in the U.S. especially. Those who support this also make the case that in many cases, these billionaires have taken advantage of the taxpayers where they are. Yeah. So, I mean, sometimes when people or businesses try to locate in a certain state, sometimes they get tax credits.

14:24They get different types of benefits from that state to help fund the business. And the states do this because it generates more income. It generates jobs in the state. Well, you know, state taxpayers build roads, you know, build the infrastructure that these businesses can flourish in. But might a downside be that, let's say this is in California. We've already seen Elon Musk pick up and leave California and move to Texas. Is there a concern that the billionaires who are also running companies that are generating revenue for the state might just leave? Absolutely. And I think it's a lot easier across states.

14:57It would probably be harder for someone to leave the United States as a whole, but definitely these individuals could leave and go to a different state or pull their businesses. And so the state could end up losing more revenue from that as a result of putting in a tax like this. We saw that years ago when they put in, they increased the top tax rate on millionaires in the state of California. And I think there were some anecdotal examples of people leaving the state because of that. Well, isn't it also true that tax people at the IRS already, that staff has been way whittled down. Who would go and check on the assets?

15:32I think this is probably one of the biggest problems with a proposal like this is the huge administrative burden. Many of these assets are going to be really hard to value, like art, jewelry, some types of real estate, like a remote island or something somewhere. So either somebody at Treasury is going to have to become an expert in all of these types of assets and somehow value them, or they're going to have to rely on taxpayers to voluntarily disclose them. And then it's going to be on the burden of the taxpayers to go and somehow get an appraisal or figure out how much of these are worth. From the California perspective, it's only at one point in time.

16:06They're only proposing a one-time tax. But I think some of the other proposals are more extensive than that. That's why there are people who are backing, we understand, a global wealth tax around the world so that there's fewer places for people to move and leave and not pay that tax. Right. Yeah. And then that's kind of what they're doing for multinational companies at this point is something similar to this, you know, more based on financial statement income and which is kind of more equivalent to wealth. But yeah, I can't imagine the administrative burden across countries trying to value assets across many countries, many of which are not really that easily observable.

16:42Yeah. What do you think the chances are? What do you think the chances are in the U.S.? Yeah, I mean, I think many states are proposing something like this now. It's hard to say from the political environment what, you know, what will end up happening. And I guess it just depends on who's, you know, who's voting. But I think there's definitely a remote possibility that it could happen or it could be, you know, kind of a more limited version. And it's something like where it's not every asset, but just certain types of assets that get taxed. And then we run into the issue of, you know, well, is that equitable if we tax Mark Zuckerberg?

17:13Because we can easily value his, you know, his shares of stock versus a family business, which is not necessarily easy to value. So how do we pick the assets that we're going to do? Yeah, exactly. Art collection, jewelry. So they could pick and choose the types of assets that they want to tax. But then, yeah, like we said, we run the issue of equity. Like what, how do we decide what types of assets that we tax? Well, stay with California. This just affects 200 people in California. 200 billionaires. And the SEIU UHW union estimates that it would raise$100 billion. Yeah. To help pay for that. I mean, that's all...

17:49It's a substantial amount of money. There are definitely costs and benefits of this, and they just really have to decide if the substantial amount of revenue that they generate is going to be worth that administrative burden that they're going to place on taxpayers and the tax authority. Yeah. By the way, this is not a new idea. 17th century Massachusetts colonists imposed a wealth tax on holdings, land, ship, jewelry, livestock. There were just a lot fewer people to check. Right. Exactly. Fewer people. And I think people had probably less complex arrangements back then. I mean, although we don't normally think about this, even a real estate tax for property tax, it's based on how much your real estate assets worth at that point in time.

18:28But real estate's pretty easy to value and they have specialists at the jurisdictions that do that. But yeah, Yeah, you're right. These taxes have been around for a long time in different forms. Yeah. Well, we'll see if they make a comeback. Christina Llewellyn, professor at the Poole College of Management at North Carolina State University. Professor Christina, thank you so much. Thank you so much for having me. I really enjoyed speaking with you.

18:56Well, one major concern for millions of Americans that does not really register with the super rich is the cost of health insurance. Premiums are going to soar next month, unless Congress passes something soon, which is looking increasingly unlikely. We're going to take a short break now, and we'll be right back with that story.

19:25Congress needs to defuse a time bomb for the cost of health insurance. Plans on the exchanges created by the Affordable Care Act have been getting more expensive for years, but subsidies have helped keep some of them affordable for millions of Americans. Those expire in a few weeks, and there are growing signs on Capitol Hill that Republicans are going to let it happen. Instead, their plan would be to give people money directly for health savings accounts, about$1 ,000 a year, to pay for health care. Democrats, on the other hand, want a three-year extension of the subsidies. Here's Democrat Lisa Blunt Rochester on CNN this morning.

20:05What they're proposing is not going to help people at the end of this year, in the beginning of next year, when they see their premiums skyrocket. There are some Republicans, like Congressman Kevin Kiley of California, who are on board with a short temporary extension, just two years in his bill, as long as it comes with other reforms to the health care system. He told to health insurance. He told Peter O'Dowd just letting the subsidies expire without anything to replace them would be a mistake. Honestly, I think there's peril for everyone in Congress. Congress right now has a 15 % approval rating.

20:41And if Congress fails to act, I think that the American people are going to hold us accountable, especially because it's inaction on the part of Congress that is allowed for health care costs to continue to grow. Republicans are in charge, though, of course. Sure. But the fact of the matter is that in order to pass anything here, you need to have bipartisan support. So that's why we need to find a bipartisan agreement. I want to ask you more about the president's speech last night. It was supposed to be about the economy. Instead, he offered no new other plans to bring down prices. He told people they are doing better economically than ever.

21:13Broadly speaking, do you think the president's doing a good job communicating a winning message to the American people? I think there's certainly a renewed focus now on trying to speak to the affordability issues that so many people are experiencing. I represent California, which is the biggest, most high cost of living state in the entire country. So I do think there has been some improvement when you look at the energy sector, for example, when you look at wage growth. But I think it's certainly true that people continue to experience a lot of pain and there's a lot more that we need to do. But based on what you heard from the president, is he staying focused enough on the economy?

21:46I mean, we heard him bashing Somali immigrants again. I didn't hear the whole speech, but I do think that needs to be the paramount focus right now for us in Congress and all around in Washington, because that's what the American people are saying, that we need to address affordability in a serious way. You can find that whole conversation and a lot more about this story, as well as so many others, at hereandnow.org.

22:15Here and Now Anytime comes from NPR and WDUR Boston Today's stories were produced by Kalyani Saxena, Karen Miller-Metson, and Lynn Managon Our editors were Todd Munt and Michael Scotto Technical direction from Caleb Green, Matt Reed, and Marcel Damiano Our theme music is by Mike Moschetto, Max Liebman, and me, Chris Bentley Our digital producers are Allison Hagen and Grace Griffin Here and now's executive producer is Alan Price. Thanks for listening. We'll be back with you tomorrow.