Anti-trust and a wealth tax
I drive a Tesla. It is the best car I have ever owned. But I don’t like the move Elon Musk has made to buy Twitter.
My concern and problem with Musk’s purchase of Twitter is about concentrated economic power that is easily transformed into anti-democratic political power. The concentration of wealth in America is worse today than it was right before the Sherman Anti-Trust Act was passed in 1890.
The Sherman Act was a democratic response to the growing economic power of the “robber barons” that emerged after the Civil War when the United States was experiencing an economic transformation driven by new modes of transportation, communication and consumer products. The men who controlled steel, railroads, finance, oil and shipping paid no federal income taxes on their vast income and wealth even after the Sherman Act. The federal income tax did not begin until 1913. These men and their closely held companies used their economic power to buy political power, controlling state legislators, mayors, congressmen, senators and even presidents.
The first major cases brought under the Sherman Act did not occur until the United States v. Standard Oil, Rockefeller’s giant oil monopoly in 1911. The case ended up in the Supreme Court, which ruled that Standard Oil had restrained trade resulting in higher prices, reduced quantities and reduced quality. The remedy was to break up Rockefeller’s company. Supreme Court Justice John Marshall in his opinion said the following:
“All who recall the condition of the country in 1890 will remember that there was everywhere, among the people generally, a deep feeling of unrest. The nation had been rid of human slavery, fortunately, as all now feel — but the conviction was universal that the country was in real danger from another kind of slavery sought to be fastened on the American people; namely, the slavery that would result from aggregations of capital in the hands of a few individuals and corporations controlling, for their own profit and advantage exclusively, the entire business of the country, including the production and sale of the necessaries of life. Such a danger was thought to be then imminent, and all felt that it must be met firmly and by such statutory regulations as would adequately protect the people against oppression and wrong. Congress, therefore, took up the matter and gave the whole subject the fullest consideration.”
I think the country is now in the real danger Justice Marshall wrote about over 100 years ago. Fortunately, there is a solution to this problem. That solution is to tax wealth and enforce the Sherman Act. The federal government should first eliminate the cap on Social Security taxes, which now is at $147,000 per year. It makes no sense to limit this tax to pay for the support of America’s senior citizens, many of whom live near or below poverty on their Social Security income. While Social Security effectively lifts over 16 million seniors out of poverty, 9 percent of Americans over 65 still live below the official poverty line. All these people could be lifted out of poverty with the elimination of the Social Security income limit.
Secondly, our tax rates need to be increased on all income from all sources. Currently the tax rates on incomes range from 10 percent on incomes under $20,550 for married couples to 37 percent on married couples earning $647,850 or more. We need more brackets. There should be a bracket for $1 million to $10 million; from $10 million to $50 million; and for over $50 million. And those rates should be greater each step along the way. My suggestion is that the minimum tax on incomes over $50 million be 50 percent.
We also need to revamp our estate taxes, or what critics call death taxes. Why should wealth so easily be passed from one generation to the next? Capitalism works best when entrepreneurs and innovators have a chance to develop. Concentrated wealth that is passed down from generation to generation encourages political shenanigans, not economic growth. No American should be allowed to pass down more than $50 million to their heirs in total. Any wealth over that should be taxed away and spent on the general welfare of society that allowed for that wealth generation in the first place.
I can hear the screams from Greenwich in my basement in Trumbull. “You are recommending killing the goose that lays the golden eggs.” I would only ask that the makers of this argument explain to me and most Americans why $50 million is not enough to leave as a legacy.
If we had a tax system that made economic sense, we could avoid the problem of Elon Musk and his fellow American oligarchs owning key companies in already highly concentrated industries. We know we have a problem when the average American can name the dominant companies in cellular communication, pharmaceuticals, oil and gas, automotive, social media, and computers. The American economy can be even more powerful than it is if we do not allow concentrated wealth, concentrated power and concentrated industries. The federal government should not allow Musk to buy Twitter, and this industry needs to be broken up, just as Standard Oil of New Jersey was in 1911.
Fred McKinney is the co-founder of BJM Solutions, an economic consulting firm that conducts public and private research since 1999, and is the emeritus director of the Peoples Center for Innovation and Entrepreneurship at Quinnipiac University.