by Patriotic Millionaires | 2.19.19
They're Rich and They’re Mad About Taxes (Too Low!)
By David Gelles
Stephen Prince was aboard the Silver Whisper, a luxury cruise ship docked in French Polynesia, sipping his morning coffee from sparkling china as he lamented a tax break that was about to save him millions of dollars.
The founder of a private company that makes plastic gift cards, Mr. Prince is among the wealthy elite who stand to benefit enormously from the Trump tax cuts passed in 2017. He estimates that his tax bill this year will be $3 million less than it would have been absent the changes.
Yet Mr. Prince, a Democrat from Nashville, is none too pleased about his windfall. He believes the Trump tax cuts are misguided and ultimately bad for the country, even as they pad his already robust bank account.
“I’m pissed off about it,” said Mr. Prince, speaking via FaceTime during a four-month, around-the-world cruise with his wife.
Mr. Prince occupies a peculiar spot on today’s highly charged ideological spectrum. A successful entrepreneur, he made a fortune with his company, National Business Products, and is now enjoying the fruits of his labor as he approaches retirement. Yet when Mr. Prince scrutinizes the laws that govern his payments to the Treasury Department, he sees an inequitable system that asks too little of him and his peers, and too much of those with not much to spare.
“People like me are not all greedy,” he continued, turning his phone around to reveal dawn breaking over the South Pacific. “We have to show that we have some concern for the country, and that we’re willing to pay some taxes.”
The sweeping reorganization of the tax code is affecting Americans unevenly. Corporations benefited tremendously. Many have reported higher profits and increased payments to shareholders. Some companies offered workers bonuses.
But many lower- and middle-income earners will not see their tax bills fall by much, if at all. Instead, the vast majority of individuals who stand to gain from the tax cuts are business owners and those who earn substantial income through pass-through entities. That is, people like Mr. Prince.
Most of those in line to benefit from the Trump tax cuts are not complaining. Plenty of business owners and investors cheered the changes as good for themselves and the economy.
But Mr. Prince has found camaraderie among an ad hoc group of wealthy individuals known as the Patriotic Millionaires. Founded in 2010 by Morris Pearl, a former BlackRock executive, the loose-knit group advocates higher taxes on businesses and the wealthy. In recent years, they have met with legislators in Washington and various state capitals, testified before Congress and endorsed candidates who endorse higher taxes on the rich.
“We’re very concerned about this huge inequality thing,” said Mr. Pearl. “And the tax cut was designed to make the rich richer.”
Now retired, Mr. Pearl is frustrated that his income from investments is not taxed at a higher rate. “I don’t work at all, but I’m making more money than most people who do work, and I’m paying less taxes than they do,” he said. “It’s a pretty good deal if you can get it, but it’s not good for the country.”
This is not the first time millionaires have voiced their enthusiasm for higher taxation. In 2011, President Obama introduced the so-called Buffett rule. Named after the billionaire investor Warren Buffett, who has spoken out in favor of higher taxes for the rich, the tax would have applied a minimum rate of 30 percent on individuals earning more than $1 million a year.
In an op-ed in The Times, Mr. Buffett lamented that his tax rate was lower than any of the other 20 people in his office, and called for changes to the tax code that would ask more of him and less of middle-class wage earners. “My friends and I have been coddled long enough by a billionaire-friendly Congress,” Mr. Buffett wrote. “It’s time for our government to get serious about shared sacrifice.”
The Buffett rule was never enacted. And last year, Mr. Buffett, of all people, cheered the Trump tax cuts, calling them a “huge tailwind” for American companies.
In recent weeks, the prospect of higher taxes on the rich has once again entered the national discourse. Representative Alexandria Ocasio-Cortez proposed a tax rate of 70 percent on income earned above $10 million. Senator Elizabeth Warren called for a 2 percent annual tax on all assets owned by households with a net worth of $50 million or more, and an additional 1 percent “billionaire surtax.”
And while the Patriotic Millionaires broadly cheer such proposals (while refraining from endorsing either plan), many high-profile billionaires — even those with left-wing leanings — swiftly pushed back. Former New York City Mayor Michael Bloomberg, who is considering running for president as a Democrat, called Ms. Warren’s idea “probably unconstitutional.” Former Starbucks Chief Executive Howard Schultz, who is considering running for president as an independent, called the policy proposal “ridiculous.”
The swift pushback from Mr. Bloomberg and Mr. Schultz was a reminder of just how far outside the mainstream the Patriotic Millionaires’ views are for the wealthy, even the liberal ones.
Eric Schoenberg, another member of the group, estimates that the Trump tax cuts will save him tens of thousands of dollars this year, and millions in the years to come.
“Our tax system is a monstrosity,” said Mr. Schoenberg, an investor who also teaches at Columbia University. “It’s terrible in ways that have been perpetually slanted toward the rich. And I say this as some one who has done quite well in life.”
Mr. Schoenberg has emerged as one of the most outspoken members of the group, taking to the internet to break down his tax returns. Had the Trump tax cuts been in effect in 2016, he would have saved some $50,000 on his taxes that year, he said.
“I’m not happy about this,” Mr. Schoenberg said. “The fact that this is putting money in my pocket is completely secondary. The whole thing is legislative malfeasance.”
For those wealthy enough to be saving tens of thousands of dollars in taxes, or even millions, the sums are not particularly meaningful from a financial perspective. After all, they’re already awful rich.
“I don’t look at it as if there’s now this extra pot of money,” said Mr. Pearl. “The pot of money is just now somewhat larger than it might otherwise have been.”
To drive home his point, Mr. Pearl used an analogy Mr. Schultz might appreciate. “If the Starbucks guy gives you an extra cup of coffee, it’s not like you think, ‘Now I have an extra $3; what am I going to do with it?’” he said.
But others in the group said they would be putting their tax savings to work. John Driscoll, the chief executive of CareCentrix, a health care company, has not done his taxes for 2018 but expects a windfall. With the extra money, Mr. Driscoll said he would double his support for progressive causes and politicians.
“My family is going to give more money to fight issues of hunger, and we’re going to invest more in candidates who don’t put the income of wealthy people ahead of people who need help,” he said. “The unnecessary and fiscally imprudent reduction in the individual tax rate gives me more income to fight the imbalances.”
Roberta Kaplan, a partner at Kaplan Hecker & Fink and a Patriotic Millionaire, recalled that when she was growing up, her father talked about being proud to pay his taxes. “He wasn’t looking for any way to lessen his tax burden,” she said. “It was his way of contributing to our country.”
At first, Ms. Kaplan dismissed the sentiment as naïve. “I remember thinking he was sort of a sucker,” she said. “But I’ve come to appreciate how much wisdom there is in that. People in our country who have done well and who benefit from all the advantages of living in this economy have an obligation to support that system and make it better and fairer.”
While the millionaires of the resistance may up their charitable giving, none said they would be making voluntary contributions to the government. (Which, yes, is a thing some people do.) Americans donated just $775,654.63 to help reduce the national debt last year, down from a high of $7.75 million in 2012.
Mr. Prince, speaking from the Silver Whisper, said he had no plans to make voluntary contributions to the Treasury. “I don’t want to just give away my money to the government,” he said.
Instead he plans to continue his quixotic quest to increase his own tax rate, even as it places him at odds with so many of his affluent peers.
“The vast majority of my friends are wealthy, too, and they think I’m an idiot,” Mr. Prince said. “I get called a traitor to my class all the time.”
Photo Credit: Delcan & Company + Saad Moosajee
Written by Patriotic Millionaires
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