Two Cents

- Hey, hun.

- [Phillip] Yeah?

- What would you do with a billion dollars?

(pensive music) I think I'd spend one third on fighting poverty.

One third towards medical research.

And one third-- (fades away) (pensive music continues) - [Voice Over] T minus five, four, three, two, one.

Lift off!

(rocket engine rumbling) (Phillip cheering) - Phillip?

- Yeah, what you said.

(light upbeat music) What does it mean to be a billionaire?

It's not someone who makes a billion a year or has a billion in cash stored away somewhere like some people believe.

Instead a billionaire is someone whose net worth is at or above of one billion dollars.

Meaning after subtracting their debts and liabilities their assets add up to a billion or more.

Assets can include cash, real estate, stocks and pretty much anything that is valuable enough to trade in for money.

- As of 2021, there are 2,755 billionaires in the world which is 660 more than last year.

Their net worth can fluctuate.

But as of early November, Elon Musk was in the top spot with a staggering 307 billion.

He recently eclipsed the current runner up, Amazon founder, Jeff Bezos.

Over the last year, these men have made money so fast that if they saw $1,000 lying on the ground it literally would not be worth their time to bend down and pick it up.

- Billionaires have more money than anyone could reasonably spend in a lifetime.

Leading many to wonder is it evil to be that rich?

This is a complicated question that could cover several episodes.

And because it's about ethics, it's fairly subjective.

But we'll look at some of the main arguments in this debate.

Give our thoughts and then let you decide.

- First, let's look at the wealth gap between the richest and poorest people in America.

Economic inequality more than doubled between 1989 and 2016.

Jeff Bezos, Bill gates and Warren Buffet collectively own more wealth than the bottom half of all American households.

That's more wealth held by three people than by over 160 million.

During the first year of the COVID-19 pandemic, billionaires grew 54% richer, while the number of people in poverty around the world increased by over a 100 million.

- Some defenders of billionaires argue that they deserve their wealth because of all they add to society, like job creation.

For instance, Amazon currently has about 1.3 million employees around the globe, but are those jobs really new or just shifted from the thousands of small retailers that have gone out of business during Amazon's rise to dominance?

- While there's no way to assign an exact amount of blame for other company's demise, there is no doubt that giant retailers like Amazon and Walmart steer customers away from smaller companies.

And whether you're a billionaire business owner or a billionaire hedge fund manager, the easiest way to make money is to ensure that you are hiring as few people as possible at wages that are as low possible.

- According to the Small Business Administration, firms with less than 500 employees are responsible for creating almost half of new jobs.

So, even though giant companies undoubtedly add jobs to the economy, they are by no means the only ones.

- Okay, so what about innovation and convenience?

It's hard to deny that Amazon has made shopping a lot quicker and easier.

And if their 386 billion dollars in sales last year is any indication, the service Amazon provides is quite popular.

Jeff Bezos certainly deserves some credit for that, but does he deserve all of it?

- [Jeff] Hmm?

- [Phillip] After all, it's not like he came up with the idea.

People have been predicting the advent of online shopping for decades.

The technology that finally made it possible, the internet, was originally developed with taxpayer dollars and the physical infrastructure it depends on, roads, bridges, electrical grids also paid for by taxes, AKA, you and me.

It's safe to say that if Jeff had never been born we'd all still be buying our books, batteries and bug spray online.

- We're not saying he doesn't deserve to be rich.

He built a company that a lot of people use and like, which no one would do without a financial incentive.

But when you take into account just how many people helped earn those billions, it seems a bit lopsided.

- That's why some politicians are pushing for a 70% income tax on the ultra wealthy to help close the inequality gap.

Now that number might sound high but it's actually much closer to what it was between 1932 and 1981.

During that time, the top tax rate never fell below 63% and rose as high as 94%.

Some are also pushing for an additional wealth tax of up to 6% on billionaires, which would tax all assets in their net worth.

- Sounds great in theory, but there's no guarantee it would work since billionaires are notorious for dodging taxes.

The lawyers, consultants, and accountants that make up the so-called "Wealth Defense Industry" can find tax breaks and loopholes, hide money offshore and employ other tricks that are technically legal but no doubt sketchy, bringing billionaires to an income tax bill of well, relatively zero.

- One of the sneakier ways billionaires avoid taxes is by taking out loans.

Yes, you heard that correctly.

The ultra wealthy borrow money, lots of it.

Not because they need to like regular people but because it allows them to access their wealth without technically producing income.

- Here's how it works.

If a billionaire takes out a huge salary they'll pay a 37% income tax on the bulk of it.

Which is why so many of them pay themselves low salary salaries.

For instance, Jeff Bezos' base salary at Amazon in 2020 was $81,840.

His real wealth is in the value of all the Amazon stock he owns, which increases every year.

But if he ever sells any of that to say, buy a boat or a new house, he'd have to pay 20% in capital gains tax.

(Jeff gasps) - [Phillip] Instead what he and many other billionaires do is take out low interest loans to finance their luxurious lifestyles.

Loans are not considered income by the IRS.

And they can even write off the interest as a deduction.

When that loan comes due they'll take out another one to pay the first one.

They can keep this going basically until they die, since who would ever deny a loan to a billionaire?

- But let's assume for the sake of argument that there is a billionaire out there who is paying their taxes and not exploiting anyone.

Are they evil just for having that much money when there's so much poverty, disease and calamity in the world?

Well, not if they're helping to do something about it.

And we can't deny there are some very charitable billionaires.

Warren buffet has given 42 billion dollars in his lifetime.

Bill and Melinda gates have given 30 billion.

Some billionaires have even given so much that they're not billionaires anymore.

- But the fact of the matter is for every charitable billionaire, there are far more hoarding their money.

Only 223 billionaires, less than 10% of them, have signed The Giving Pledge, a promise to give away a majority of their wealth to charity or philanthropy during their lifetime or in their wills.

And Jeff Bezos is not one of them.

Though his ex-wife Mackenzie Scott did sign the pledge and has given away over five billion since their divorce, leaving her with a paltry 55 billion.

Sad.

- But even if every billionaire gave away half their money to charity, we're still letting a handful of unelected people decide which causes are worthwhile and which aren't.

Ideally a representative democracy like ours would use taxes and elections to give the people at least some say in how our excess wealth should be allocated.

- Don't get us wrong.

The issue is not black and white.

It's not like there's some specific dollar amount where a plucky entrepreneur suddenly becomes a scheming super villain.

Capitalism isn't perfect but it's a system that allows people to reap the benefits of their risks and hard work and has lifted millions out of poverty in the last 100 years.

- That's why some economists say that holding billionaires accountable is actually a defense of capitalism.

The scale of inequality in America today is virtually unprecedented.

When so many families are struggling to make ends meet, when so many schools and public programs are starved for cash.

Meanwhile, half the nation's wealth is being hoarded by a handful of people.

Well, that's when citizens start to feel like their economic system has failed them and they either wanna fix it or look for another one.

And that's our "Two Cents."

- And that's our "Two Cents."