The billionaires telling other billionaires to shut up and pay their taxes

Nvidia CEO Jensen Huang said California's wealth tax proposal was "fine." (Joshn Edelson/AFP/Getty Images via CNN Newsource)

NEW YORK — Nvidia CEO Jensen Huang, who has a net worth estimated at roughly US$200 billion, was recently asked about California’s wealth tax proposal that has some billionaires riled up.

“It’s fine,” he said. “I never once thought about it.”

Many U.S. billionaires are frustrated over blue states’ and cities’ attempts to raise taxes on the superrich. Silicon Valley titans Sergey Brin and Peter Thiel are spending millions to fight California’s proposal.

Financier Ken Griffin called Mayor Zohran Mamdani using Griffin’s Manhattan penthouse as the backdrop for his video proposing a pied-à-terre tax “shameful.” Steven Roth, CEO of real estate giant Vornado, compared calls to tax the rich to a racial epithet.

But Huang represents a segment of the superrich who are telling their fellow billionaires to get over it. Paying taxes is a “way of giving back,” he said. He joked that the money should go to fix a specific pothole on Route 101.

Tom Steyer has also staked his campaign for governor in California on raising taxes for people like himself: “I’m the billionaire who wants to tax other billionaires.”

Billionaires are not a monolith, and their split reveals both political and generational fault lines. It also reflects differences in their views of government.

Some older billionaires, like Warren Buffett and Bill Gates, have long supported taxes on the superrich as a civic responsibility. Many younger, libertarian-leaning tech entrepreneurs doubt government’s ability to solve problems and believe they can allocate their money more effectively.

Many wealthy individuals have felt personally attacked by government actions throughout American history, but this moment feels different, said Kimberly Phillips-Fein, a historian of capitalism and New York City at Columbia University.

“Griffin, Roth and others perceive the tax as a symbol of political antagonism toward the rich,” she said. They want their contributions recognized and respected, and taxing the rich “feels to them like an unbearable personal insult” that questions their “moral virtue.”

But wealth taxes or taxes on luxury second homes wouldn’t fundamentally restructure America’s tax code at the top.

In reality, the tax system targets workers with the highest salaries— often different than the people with the most wealth. The wealthiest people in America pay lower taxes than the full population: The 25 top billionaires’ wealth rose by $401 billion from 2014 to 2018, but they paid a federal income tax rate of just 3.4 per cent, ProPublica found.

Progressive states such as Washington, Massachusetts and now California are attempting to raise taxes on the ultrawealthy to reduce income inequality and concentrated economic and political power at the top.

However, it’s risky for individual states to overhaul their tax systems because people can leave or start businesses in lower-tax states. Wealth taxes have also been notoriously hard to administer — art, real estate and intentionally complex business partnerships are difficult to value. Wealthy people have also devised tax avoidance strategies.

“We’re living in a world that heavily burdens income earners, salaried people paying a lot of taxes. The wealthiest are given a free ride,” said Ray Madoff, a professor at Boston College Law School and the author of “The Second Estate: How the Tax Code Made an American Aristocracy.”

Taxing income, not wealth

Opponents of taxing the wealthy often point out that one per cent of the highest earners pay 40 per cent of income taxes. If cities and states keep hiking taxes on the wealthiest, they will kill off the golden geese who fund public services, those critics say.

This argument is a sleight of hand, Madoff said. It misses that most billionaires’ wealth comes outside of taxable income. Many mega-billionaire CEOs such as Mark Zuckerberg and Elon Musk take a $1 salary or no salary at all. Only half of U.S. families in the top one per cent of wealth distribution are in the top one per cent of income distribution.

The top billionaires’ wealth often comes from the growing value of their stock holdings, which are subject to lower taxes than income. But they find ways to avoid paying even lower capital gains taxes by holding on to stock to avoid paying taxes on gains or offsetting them by selling other investments at a loss.

“The payment of capital gains taxes has become optional under our current system,” Madoff said.

Many billionaires also received inheritances, which are also income-tax free on the assumption that they will be covered under the estate tax system. But U.S. federal estate tax revenue has barely budged over the last few decades due to loopholes.

In the absence of federal reform, states are trying to squeeze out more money from the richest. But new wealth taxes may backfire.

Twelve countries had wealth taxes in 1990, but only three still remained by 2024. Some countries, such as Sweden, repealed them to become more financially competitive, while others, like France, found that the superwealthy were moving their assets to other countries.

“States have a problem because they are in competition with other states,” Madoff said. “Going after the rich is done most effectively on the federal level.”

By Nathaniel Meyersohn, CNN