American billionaires spent $880 million on the midterm elections by the end of October, with the final total spent likely approaching an astronomical $1 billion. That’s a game-changing amount of money, and with the lion’s share of it going to Republican candidates and groups, the billionaires were confident they would be able to get their money’s worth. Fortunately for most regular Americans, a “red wave” was largely avoided, but billionaire wealth still has a deep and troubling hold on our democracy.
We live in a country where support from the wealthy, rather than the public, is the number one determining factor in a policy proposal becoming law. As billionaire wealth continues to grow, and their spending on our elections grows accordingly, this will only worsen. If we want to stop our slide into oligarchy – where a few rich and powerful people call all the shots – and save our democracy, we need to shrink billionaire fortunes by taxing the ultra-rich, and we need to do it now.
Right now, the wealthiest Americans pay almost nothing in taxes. Thanks to a dizzying array of loopholes and special rules for the rich, the 25 richest people in America paid a tax rate of just 3.4% between 2014 and 2018 on over $400 billion in wealth gains. As a result, billionaire wealth grew by over 60% during the pandemic, increasing by over $1 trillion in 2021 alone. It’s no wonder they’re spending more to influence our elections. After all, they’ve got an extra trillion dollars to throw around.
This level of extreme wealth coupled with a campaign finance system that allows single individuals to make obscenely large political donations is a devastating combination. It doesn’t matter what groups or causes they champion (even if they happen to be ones that we agree with), at the end of the day, ultra-wealthy people like us should not be allowed to use our wealth to warp elections and politics in our preferred direction and, in the process, effectively drown out the voices and demands of everyone else in the country.
In 2010, the Supreme Court ruled in the now-infamous Citizens United case that corporations, labor unions, and other advocacy groups could spend unlimited amounts of money on “independent expenditures,” i.e., political advertising conducted separately from candidates’ campaigns. Subsequent rulings followed this precedent and extended this right to individuals.
Political spending by the rich was already enormous before Citizens United, but the ruling made it explode. Since 2010, billionaire donors have spent 39 times more in federal elections. Between 2009 and 2021, the top twelve political ‘mega-donors’ accounted for 1 out of every 13 dollars spent in federal elections. And if that wasn’t enough, in the 2020 election cycle, billionaires contributed almost 1 out of every 10 dollars received by federal campaigns.
The midterms were obviously no exception to the trend of the ultra-rich dominating our elections. As mentioned, billionaires spent $880 million on the midterm elections by the end of October – which was 44% more than what they contributed in the 2018 midterms.
In essence, the five Supreme Court justices who decided Citizens United declared that money equals speech in America. But they were wrong. Money is not speech – instead, it is power. All of us have the opportunity to contribute to our favored political causes and campaigns and make our voices heard, but only the rich have the financial power to make use of that opportunity. This overwhelms the voices of everyone else in America. Americans for Tax Fairness Executive Director Frank Clemente put this phenomenon best when he said that billionaire wealth is “drowning our democracy.”
Billionaires use their wealth to purchase political power. The fact that they are able to do this with such ease is why we like to call them oligarchs.
Billionaires want you to believe you can do nothing to stop them from transforming America into an oligarchy where a few ultra-wealthy people like them call all the shots. But don’t be fooled – a lot can be done to right the ship and win the battle for economic and political justice in America. It took deliberate policy choices to design this system, and deliberate policy choices can fix it.
It is clear beyond a shadow of a doubt that excessive billionaire wealth is a danger to our democracy. It is being spent in massive amounts to shape both the public debate and the makeup of Congress and crowd out ordinary Americans’ voices. Without a Constitutional amendment addressing political spending in American politics, we cannot limit how much money the powerful can dump into corrupting the political system. The only vehicle left then is to constrain the wealth that fuels it.
How we can fix it
If we want to save our drowning democracy and stop this deluge of billionaire cash, then the simplest, most effective way to do so is to dry up its source by taxing billionaire wealth.
If we want to slow down this growth and make billionaires pay higher taxes, we can start by making them pay taxes, period. The US tax code currently allows the rich to defer paying taxes on capital gains until those gains are realized when an asset like stock or real estate is sold. This allows the ultra-wealthy to hold onto their assets without selling them, live off of low-interest loans using those assets as collateral, and pass on their assets directly to their heirs when they die, leaving their wealth gains permanently untaxed in a scheme that tax experts call “buy, borrow, die.”
A simple solution to this problem is to make the ultra-wealthy pay taxes every year like everybody else. The Billionaire Minimum Income Tax (BMIT), introduced in Congress this July and endorsed by President Biden, would do exactly that. It would require the wealthiest 0.01% of households to pay a minimum 20% tax on all of their wealth gains each year, including unrealized capital gains. That means no more perpetual deferment of tax payments, no more sheltering wealth for generations, and no more “buy, borrow, die.” If tens of millions of Americans can pay taxes every month on every single paycheck, the richest people in the country can pay once a year.
Our tax goals can and should go beyond the Billionaires Minimum Income Tax. The current top capital gains rate of just 20% is far too low, especially when you consider that a worker earning $60,000 a year in ordinary income has a top rate of 22%. We could also take on billionaire wealth directly through a wealth tax rather than focusing on income.
But the BMIT is the right place to start. It’s already earned significant support in Congress, and for good reason. It’s hard to argue that billionaires can’t afford to pay taxes every year when millions of working-class families manage it just fine. This is a no-brainer and one that is especially urgent.
Background Reading and Resources
The US Has a Ruling Class – and Americans Must Stand Up To It | Bernie Sanders | The Guardian