By Chuck Collins, Omar Ocampo and Sophia Paslaskiis | –
Billionaire Wealth and the Pandemic
( Inequality.org) – In its 34th annual list of global billionaires, published on April 7, 2020, Forbes reports a modest decline in the total number of billionaires from 2,153 in 2019 to 2,095in 2020. “The world’s richest are not immune to the devastating impact of the coronavirus,” noted Kerry Dolan, Forbes assistant managing editor of wealth. “The drop in the number of billionaires this year reflects the economic impact the pandemic is already having.”23The total combined net worth of the global billionaire class declined from $8.7 trillion in 2019 to $8 trillion in 2020, due both to the pandemic and to roiling global markets. A total of 267 affluents dropped off the list because their fortunes fell below $1 billion. Another 21 who made the 2019 list have since passed away.
Of the total 2,095 billionaires on the Forbes global list, 1,033,or 49 percent, have seen their wealth increase over the past year. U.S. billionaires have seen ups and downs over the same period. Their ranks increased from 607 to 614people, but their total wealth declined from $3.111 trillion in 2019 to $2.947 trillion in 2020, according to Forbes. This year’s Forbes report examines billionaire wealth as of March 18, 2020, a bit later than the February dates fixed upon in the magazine’s previous 33 annual reports. By April 5, two-plus weeks after March 18, U.S. billionaires had seen their collective wealth rise back to $3.017 trillion, and by April 10 their wealth had surged to $3.229 trillion, surpassing the 2019 level.
Between March 18 —the near bottom point of the pandemic financial swoon —and April 10, 2020, U.S. billionaire wealth rebounded by $282 billion. The Jeff Bezos Wealth Surge is an unprecedented dynamic in the history of modern markets. Tracking Bezos’ wealth requires a real-time hour-by-hour tracker. As of the publication of this report, Bezos’ wealth has increased over $25 billion since January 1, 2020 and $12 billion since February 21st, 2020, the beginning of the Covid-19 pandemic.
Billionaire wealth, as these numbers show, tends to rebound from market meltdowns. In the immediate aftermath of the global economic crisis of 2008, the Forbes 400 saw their combined wealth decline $300 billion from $1.57 trillion in 2008 to $1.27 trillion in 2009. Within 30 months of the September 2008 crash, most of these fortunes recovered. By 2012, billionaire wealth had reached$1.7 trillion, exceeding pre-2008 levels. Between2010 and 2020, the combined wealth of the U.S. billionaire class surged by a staggering 80.6percent, from $1.631trillion to $2.947 trillion in 2020 dollars.
We can probably expect that Wall Street and equity markets will rebound faster than the rest of the economy, including unemployment, savings, home values, and other economic indicators that measure the economic security of the bottom 80 percent of households.
Billionaire Pandemic Profiteers
Ordinary people around the globe may now be struggling to survive a ravaging public health and economic crisis, but early indicators suggest the billionaire class will maintain its wealth or even see a major surge. Since January 1, 2020, 34 of the wealthiest 170 U.S. billionaires have seen their total net worth increase by tens of millions of dollars according to the Bloomberg Billionaire Index. These include eight billionaires who, as of April 10, have seen wealth gains of over $1 billion.
1. Jeff Bezos, Amazon founder and CEO: up $10 billion ($25billion as of April 15, 2020). The stock market crash initially left Bezos’ net worth deeply damaged, down to a meager $105 billion on “Black Thursday” March 12, the stock market’s lowest point. Bezos’ wealth has been trending upward ever since, with no company better positioned to profit from the pandemic than Amazon. The closure of hundreds of thousands of small businesses is giving Amazon the opportunity to increase its market share, strengthen its place in the supply chain, and gain more pricing power over consumers. Despite Amazon’s e-commerce dominance, Bezos has been unable to protect his workforce from Covid-19: Workers in 10 different Amazon warehouses tested positive for the disease in late March. Instead, in early April, Bezos announced a donation of $100 million of his $140 billion in wealth to Feeding America.
2. Elon Musk, Tesla CEO and SpaceX founder and CEO: up $5 billion After initially dismissing the coronavirus pandemic as “dumb,” Musk is now taking the crisis much more seriously as confirmed cases continue to grow. New York City Mayor Bill DeBlasio directly reached out to Musk via Twitter and asked him to help address the shortages of critical medical equipment. SpaceX responded by partnering with Medtronic, a medical device company, to help increase the firm’s capacity to produce ventilators,33while engineers at Tesla are creating prototypes from used car parts.34As a result, Musk’s wealth has recovered since mid-March after dipping $3.1 billion below its level at the beginning of the year. This turnaround has added $8.1 billion to the Musk fortune in less than a month.
3. MacKenzie Bezos, novelist and philanthropist: up$3.5 billion (and up $8.6 billion as of April 15, 2020) MacKenzie Bezos owns a 4 percent stake in Amazon transferred to her by ex-husband Jeff Bezos and has likewise enjoyed the company’s market domination in recent weeks. She is behaving somewhat more charitably. In 2019, before the divorce and transfer of assets finalized, she signed the Giving Pledge, promising to give away the majority of her wealth. Jeff Bezos has yet to sign.
4.Eric Yuan, Zoom founder and CEO: up$2.58 billion. The Covid-19 pandemic made Yuan one of the few billionaires whose net worth increased as the markets crashed in late February, an unsurprising gain since social distancing has increased the demand for videoconferencing. More people used Zoom in the first few months of this year than in all of 2019. Zoom’s success has made Yuan a household name and earned him a spot on the Forbes world billionaires list. But the Zoom platform has of late come under much sharper scrutiny, with widespread global concern over its lax privacy practices and security breaches.
5.Steve Ballmer, Los Angeles Clippers owner and former Microsoft CEO: up$2.2 billion Ballmer, no longer in a position of leadership at Microsoft, remains a significant shareholder in the company. Microsoft has two online videoconferencing platforms, Skype and Teams. Skype daily activity has increased 70 percent, a modest gain compared to a 1,000 percent upsurge in March for Teams, a business app. Microsoft is looking to take advantage of this sudden popularity of Teams by announcing that a version for consumers will soon be appearing. Ballmer has also been active in philanthropy, pledging to donate more than $25 million —0.04 percent of his wealth—to combat the coronavirus.
6.John Albert Sobrato, Silicon Valley real estate mogul: up $2.07 billion. Sobrato is the chairman emeritus of the Sobrato Organization, whose portfolio includes the Silicon Valley office spaces of Amazon, Google, Facebook, Netflix, and Apple. It’s unclear how Sobrato has managed to grow his fortune during the pandemic, but the tech giants his company houses are all doing well in this period of social distancing.
7.Joshua Harris, Apollo Global Management cofounder and owner of multiple professional sports teams: up $1.72 billion Harris’ financial links with Jared Kushner position him to influence the Trump administration’s economic response to COVID-19. Apollo, a major private equity firm, helped ensure that Trump’s coronavirus bailout funds provided liquidity to businesses. These funds did not go to private equity firms directly, but they did shore up the firms’ portfolios by going to companies where these firms have holdings. Harris is seeking to profit further from the pandemic by asking the administration to relax rules on a loan program in a way that would directly benefit his firm.
8.Rocco Commisso, Mediacom Communications founder and CEO and owner of two professional soccer teams: up $1.09 billion The stock market crash originally handed Commisso a net loss of $800 million, but his net worth recovered around the time Mediacom secured a March 23 financing deal that lowered its interest payments and extended the vast majority of the company’s debt maturities. Commisso, who immigrated to the United States from Italy at the age of 12, has directed most of his COVID-19 philanthropic efforts to Italian hospitals . . .
As part of the emergency pandemic response, the nation should now: Establish a Pandemic Profiteering Oversight Committee. Congress needs to convene an oversight commission, modeled after the Truman Commission during World War II, to both monitor the stimulus package and root out corruption and profiteering in society as a whole. As part of the passage of the CARES Act in March 2020, Congress created several oversight bodies to monitor the $2 trillion in funds appropriated, including a five-member Congressional Oversight Commission and the Pandemic Response Accountability Committee. But oversight needs to go beyond just the administration of stimulus programs and look at profiteering in the economy at large. Enact an Excess Profits Tax. During the major wars of the 20th century, Congress instituted excess profits taxes to discourage speculating and profiteering around the basic needs of life. These taxes proved workable and effective.
Stop Wealth Hiding. As much as$21 trillion in wealth is now sitting hidden in offshore tax havens, shell companies, and trusts. Congress should crack down on capital flight and wealth hiding. A good start would be to pass the Corporate Transparency Act (HR2513) and require the disclosure of beneficial ownership of corporations and limited liability companies, key tools in the wealth hiding toolbox.
Set an Emergency Millionaire 10 Percent Income Tax Surtax.
Congress should signal to the wider public that the first several trillion dollars of revenue raised to help cover the nation’s bailout costs will come from the billionaires and richest 0.2 percent of taxpayers—those Americans who have seen the most enormous gains over the last several decades. Middle-and working-class families, many of whom have yet to recover from the 2008 economic meltdown, should be held harmless from additional tax liabilities until the richest households have paid their fair share. A wealth tax might be attractive as an emergency measure, but enacting a new tax regime on assets would be challenging in the short term. Using the existing income tax system, Congress could levy an emergency 10 percent millionaire surtax on the top 0.2 percent, those with incomes over $2 million. Unlike income tax rate hikes on wages and salaries, the surtax would apply equally to income from investment returns. Though only affecting the richest 0.2percent of Americans, a millionaires surtax would raise an estimated $635 billion over 10 years and hit the very wealthy who garner substantial
17revenue from capital gains —that is, from owning assets, rather than just working for a wage.
The Millionaire Surtax (S. 2809, HR. 5043) was introduced in Congress in 2019 by Senator Chris Van Hollen (D-MD) and Senator Sherrod Brown (D-OH) and Representative Don Beyer (D-VA).Create a Charity Stimulus. Billionaires have for years now been donating funds to donor-advised funds and private foundations, accepting tax breaks, and warehousing funds that ought to be distributed to charitable operations. Congress should act to mandate a timely payout of these taxpayer-subsidized charity funds to fulfill the public interest.
Donor-Advised Funds. Over $120 billion is warehoused in private donor-advised charity funds (DAFs) without any requirement for dispersal. Donors have already taken tax breaks on these dollars and have no incentive to move funds to active charities on the ground. Congress should mandate that DAFs payout funds within three years.
Foundation Payouts. Private foundations hold an estimated $1.2 trillion and are required to pay out 5 percent per year. But overhead expenses can be included toward this 5 percent. Congress should institute a three-year emergency payout mandate, temporarily increasing the pay out to 10 percent and excluding overhead, impact investments, and donations to donor-advised funds from satisfying this requirement. Such a program could raise $190 billion over three years.74
Longer-Term Revenue Raisers and Reforms
A Progressive Estate Tax. Congress should pass a series of estate tax reforms such as those introduced by Senator Bernie Sanders that would levy a top rate of 77 percent on inheritances over $1 billion. The Sanders bill, the “For the 99.8% Act, ”would also plug up loopholes and ban trusts that wealthy families use to hide and perpetuate wealth dynasties.
Sen. Elizabeth Warren has proposed a 2 percent annual tax on household wealth over $50 million and a 3 percent rate on wealth over $1 billion. These ideas have broad public support, including among Republican voters who recognize we are living in a second Gilded Age of wealth inequality.
Shut Down the Hidden Wealth System.
For any of these tax policies to be effective, Congress must shut down the international wealth hiding apparatus by using legislation, trade negotiations, and international sanctions to require greater corporate transparency, eliminate tax dodges, and provide greater resources for tax enforcement . . .
Billionaire Bonanza 2020, published by the Institute for Policy Studies on April 23, 2020.
Chuck Collins directs the Program on Inequality and the Common Good at the Institute for Policy Studies, where he also co-edits Inequality.org. His most recent books include Is Inequality in America Irreversible? and Born on Third Base.
Omar Ocampo is a researcher for the Program on Inequality and the Common Good at the Institute for Policy Studies. He has a BA in political science from the University of Massachusetts and a Masters in international relations from the American University in Cairo.
Sophia Paslaskiis a researcher and writer with the Program on Inequality at the Institute for Policy Studies.She has a BA in film production from Emerson College and a MA in Comparative and International Social Policy from the University of York, UK.
Excerpted from Inequality.org
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