The Billionaires Would Like A Receipt, Please

Steve Mnuchin “generally” supports “making sure the appropriate taxes are collected” in the US. “But when you talk about targeting one segment of the population in a very specific way, I worry about the unintended consequences.”

That’s according to… well, to Steve Mnuchin, who spoke to Bloomberg Television while glad-handing in Saudi Arabia.

The Kingdom held its flagship investment conference this week in Riyadh, where lots of billions (and their handlers) congregated at the King Abdulaziz International Conference Center, but also at the Ritz-Carlton, the site of Mohammed Bin Salman’s infamous 2017 purge, during which a host of royals and government officials were imprisoned pending tens of billions in tribute payments.

But who remembers that, right? It’s like Larry Fink said in November of 2018 when quizzed about BlackRock’s feelings towards the Saudis following the murder of dissident journalist Jamal Khashoggi: “Everybody has their own theories. Nothing is black or white.”

Speaking of Fink, he attended the conference too. On Tuesday, during a panel discussion that included Ray Dalio, both men rehashed the customary billionaire talking points on taxes and redistribution.

Dalio said he’d “support anything that’s going to have the effect of being spent on creating equal opportunity and greater productivity,” but expressed doubt that a special tax on the super-rich would accomplish those goals.

For his part, Fink conceded he has “more to give” but only if “we could find solutions where the money could be directed in a proper way.” “I’m not even sure where that money is well spent now,” he said, of federal outlays.

The context, of course, is the global effort to close wealth gaps which have ballooned to Belle Époque extremes (figure below) in the years since the Reagan “revolution” (which I refuse to dignify with a proper noun).

More immediately, Mnuchin, Dalio and Fink spoke during a week when Democrats were busy hammering out the details of a plan to help fund Joe Biden’s expansive social spending plan. On Wednesday, they announced a “Billionaires Income Tax” proposal.

As regular readers are well apprised, this debate is absurd on almost every level, not least of which is the fact that we don’t have to tax anyone to “pay for” expenditures. I won’t delve into that particular debate here, but those interested are encouraged to read “The Wealth Tax And Our Shared Insanity.” Colloquially speaking: If you’ve got questions on my position, that linked article has the answers you’re looking for.

My aim here is more narrow. I want to touch briefly on the (unspoken) notion that the ultra-wealthy, by virtue of their higher tax burden, are somehow entitled to a personalized audit of government spending which they can then cite while preemptively refusing to comply with a hypothetical tax increase targeted at their fortunes.

Folks like Mnuchin and Fink seem to take public goods for granted, at least from an economy-wide perspective. People with that much money invariably engage in philanthropy of some sort, and in many cases that entails personally funding initiatives that produce and provide for public goods. So, it’s certainly not as if they don’t understand the premise. Indeed, there’s a very real sense in which you and I will never do as much good for the world as a billionaire because we simply can’t afford to, for example, spend $5 million building parks and playgrounds or donate $50 million to an initiative aimed at establishing enhanced education programs for at-risk youth.

What seems to get lost on occasion, though, is the fact that just like everyone else, Fink, Mnuchin and their peers, avail themselves of public goods every, single day. Admittedly, I didn’t review his Tuesday remarks in their entirety, so this isn’t really “aimed” at Fink. Rather, I’m using the cherrypicked soundbite (above from Fink) to address a common refrain among the wealthy when it comes to paying higher taxes — namely that the government isn’t particularly efficient or adept when it comes to spending money.

That contention, as stated, is unequivocally true. But it’s often accompanied by the implicit (and sometimes explicit) suggestion that we can’t locate any of our tax dollars. The corollary is that additional tax dollars extracted from billionaires will disappear into the black hole of Beltway chicanery and ineptitude.

There’s some truth to that too, but we can, in fact, locate a lot of our tax dollars. It’s likely, for example, that you’re treading on them when you walk down a paved street. Or that your dog is enjoying them when he rolls around in some grass at a local park. And so on. If we want to be precise, we’ll need to differentiate between local, state and federal expenditures, but you get the point.

It’s up to voters, as a collective, to hold lawmakers accountable for properly allocating tax dollars. You can (very plausibly) argue that voters aren’t good at that or that the opacity of DC politics makes it impossible for citizens to monitor where their money is going, but that’s a separate debate.

The overarching point is that it’s not incumbent on lawmakers to provide Larry Fink with a ledger proving every dime he paid in taxes was allocated in a way that he would describe as money “well spent.” Just like nobody elected Leon Cooperman to oversee the distribution of Americans’ tax dollars.

Whether Fink and Cooperman would, in fact, be better at appropriating funds than Congress is irrelevant. It’s eminently possible that they would be considering the incompetence on display in Washington. But the wealthy have plenty of avenues down which to drive on the way to buying influence on Capitol Hill without essentially refusing to pay extra taxes unless someone can send them an itemized receipt for services rendered.

As to Dalio, I view his remarks as more than pretense. He’s genuine. Or as genuine as one can be about reforming capitalism when capitalism made you fabulously wealthy.

The problem with Dalio is that his writing (which I assume reflects the way his brain works) is unfocused. You need a wide lens, but his is so wide that it sees only forest, never trees.

In most cases, it’s preferable to understand the whole, even at the expense of granular knowledge vis-à-vis the parts. But in democratic societies, you can’t theorize your way to equality of opportunity. In a system of checks and balances and participatory democracy, no benevolent autocrat can wake up one morning and declare a new epoch under the banner of “common prosperity.”

In fairness, Ray seems not only aware of that, but frustrated by it. In 2019, during a contentious exchange with CNBC’s Joe Kernen, an exasperated Dalio exclaimed, of American-style capitalism, “One way or another you’ve got to engineer the goddamn thing to get results.”