Front Burner - The millionaires on a mission to pay more taxes

Episode Date: June 3, 2022

Last week, political leaders and elite business people gathered at the World Economic Forum's annual summit in Davos, Switzerland, to discuss solutions to problems such as climate change, the war in Ukraine and the growing global food crisis. But outside, among the usual crowds of protestors, were some unusual participants: members of the wealthy one per cent. They're part of a growing movement that is calling on governments to impose wealth taxes on the world's richest people. Today, Front Burner talks to Morris Pearl, the former managing director at the investment firm BlackRock and current chair of the group Patriotic Millionaires, about why he wants to pay much more in taxes and why it could alleviate many of society's biggest problems if more rich people wanted to do the same.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Jamie Poisson. Davos, the home of the World Economic Forum's annual meeting. Just imagine the net worth of some of the people that have passed through this building over the last few decades. Last week, the World Economic Forum held its summit in the Swiss luxury ski resort of Davos. There political leaders and elite business people gathered to talk about solving problems

like climate change, the war in Ukraine, and the growing global food crisis. As usual, this year there were also activists outside, holding up signs calling for governments to serve the 99 percent%, not the elite few inside. Just because you're in power doesn't mean you should be in charge. But there are some unlikely demonstrators out on the streets, people who are part of that wealthy 1% themselves. As I'm here with patriotic millionaires from the UK, we're protesting here at the World Economic Forum in Davos. The group Phil White represents, Patriotic Millionaires, is calling for world leaders to increase taxes on the ultra-wealthy, people just like himself. And we're here with some 99% people as well, so we've got the 1% of the billionaires and the 99%.

And we're here with a common agenda and actually this united front saying we need less inequality. We need better tax systems. Patriotic Millionaires, which started in the US, is part of a growing movement of rich people demanding to be taxed more. There's the Tax Me Now initiative in Germany and there's Millionaires for Humanity,

which is calling for a 1% wealth tax on multimillionaires around the world to pay for things like COVID recovery and fighting climate change. The group has several Canadian members, including Sylvie Trottier. Well, I'm part of a family that is a part of the 1%. So I do benefit from our current economic system, which is a complete happenstance, right? I was just born to it. So I've done nothing necessarily to earn this position. Inequality is very, very high in Canada. You know, the top 1% of wealth holders in Canada own more than a quarter of the wealth and the bottom 40%, just 1% of wealth. So there's an extreme imbalance there. And I think myself, others in that class

should pay our fair share. Today, I'm speaking with Morris Pearl about why he's pushing to pay more. He's a chair of that first group I mentioned that was protesting at Davos, Patriotic Millionaires. Hi, Morris. Thank you very much for being here. It's great to be in your show. It's great to have you. So you became a millionaire while working on Wall Street. Your last job there was as an executive at BlackRock, one of the biggest investment firms in the world. And now you advocate full-time for people like your former clients and yourself to be taxed more. And was there a moment that led to this shakeup for you? You know, I'll tell you, one day we were at a meeting in Athens, Greece,

on the top floor of a fancy bank building. And I walked over to the window so people wouldn't see I was taking two chocolate puddings from the buffet. And I looked out and for a moment, I thought I saw a parade. And I realized it was kind of a demonstration or maybe even a riot moving down the street towards where Parliament meets. You know, and then I turned around and walked back to this meeting. And I thought to myself, are we really doing anything good for the people of Greece other than these couple of dozen bank

executives whose jobs are hopefully saving by getting their bank bailed out from the IMF and the ECB. And a few months later, I just told the people at BlackRock, I've done as much as I could for them. And I decided the best way to do what I could for my children and now grandchild, was not making them a few million dollars more, but in trying to change the world so that they and their generation can grow up with the kind of opportunities that people in my generation had. How do you think, or how did that message tend to go down among your peers? Because I understand that while you were still a BlackRock, you were already already becoming pretty vocal about, about all of this. There's a small number of people, you know, don't like the idea of paying taxes,

but honestly, the vast majority of people realize that this growing inequality is not good. It's not good for investors. It's not good for business people. And it's not good for most people. You know, the vast majority of people that I know do not want the United States to be like Greece was, you know, eight years ago. And they realize that we're moving in that direction. They realized that, you know, we have civil unrest here. Some of the root cause is that this growing inequality. So the work you're doing now with Patriotic Millionaires, I should say this group has hundreds of members. Some people, our listeners may have heard of like Abigail Disney. She's a documentary producer and an heiress to the Walt Disney Company fortune. And so what are the millionaires and billionaires in your group actually calling for to try and fix this entrenched and growing inequality?

rich and make lots of money, pay higher tax rates, or at least the same tax rates instead of lower tax rates than all the people who work for a living. Currently, part of the problem is that we only have income tax here. And the secret is, if you're already rich, you don't need to have much income. And maybe just to make that a little bit more concrete, I remember, I'm sure you saw it last year, reporters at ProPublica used IRS data to show just how little income tax some of the richest billionaires were paying. But I don't think that people really understood that you could be a multi-billionaire and actually pay zero recently, Elon Musk in 2018, zero federal taxes. So we obtained a vast trove of IRS data, not just tax returns. Like in the case of Berkshire Hathaway CEO Warren Buffett, who's actually been very vocal

about raising taxes on the rich, he paid what ProPublica calls a true tax rate of 0.1% compared to how much his wealth grew in that period. So it is really almost nothing. I mean, honestly, the thing that I thought when I read that ProPublica report is, why is this news? Doesn't everyone already know that? Of course, Warren Buffett doesn't pay much taxes on the money he makes. He made billions and billions of dollars because the value of his company that he partially owns, Berkshire Hathaway, went up by many billions of dollars. But his income is just a tiny, tiny fraction of that on which he pays taxes. So he pays taxes at a very low rate, mind you, also below 20% on an income of some millions of dollars a year. But you can live

pretty well on a few million dollars a year. I've tried it. It's possible. But of course, he doesn't, no one pays any tax on the billions and billions of dollars that his wealth increased because he made money as this value of his stocks went up. That's not counted as income. We think that when people make money from owning a company and the value goes up, they should pay taxes on that money they make. The same way that everyone who works for a living has money deducted from their paycheck every single week to pay their share of the taxes, so should investors like me. You know, I sit here and watch on the computer screen my wealth going

up, and yeah, I made money. I can spend that money and buy stuff, but I don't pay any taxes on that until I have what we call realized capital gains, which I almost never have. And we should change the rules. I just want to talk a little bit with you about how much revenue we're potentially talking about here. So I know that you co-authored a report along with Oxfam and some other groups making the case for a wealth tax on the extreme rich. And your report found that in Canada, an annual wealth tax with rates of 2% on wealth over 5 million, 3% on wealth over 50 million, and 5% on wealth over a billion would raise $78.9 billion a year. What would that kind of money potentially mean?

I mean, that's a huge amount of money for a country like Canada and even more money for other countries like the United States. And that can make a difference in people's lives in terms of their schools and their hospitals and the benefits they get from their country. And it's all from just making people who are already very rich pay taxes the same way that almost everyone who works for a living already does.

Most people in the United States and in Canada are familiar with a wealth tax because most people, their wealth is their homes and they pay a tax every single year, a property tax on their homes. Now, most people are still in that situation. They still pay real estate tax, but the very wealthy people, most of their wealth is their stocks and their ownership of their businesses and their companies. And they don't pay any wealth tax at all in that wealth. And that's just not fair. In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization,

empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo. 50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. To listen to this podcast, just search for Money for Cups.

And I'll just, for our listeners, throw out just another number here from that report that you guys wrote. Globally, a similar sort of wealth tax would raise $2.52 trillion annually, which is enough, according to the report, to lift 2.3 billion people out of poverty, make enough vaccines for the whole world, deliver universal health care and social protection for all citizens of lower and middle income countries, 3.6 billion people. If I was a millionaire or a billionaire, I might feel like what you're calling for here is really a threat to my interests. So and I know this is something that you alluded to sort of in the beginning of this conversation, but I think it's probably worth me asking you this question outright.

Why would other millionaires and billionaires want to join your movement? Well, we think that we're the ones on the right side of history. You know, a lot. Everyone's read Nick Hanauer's famous piece about the pitchforks are coming. And it's not just pitchforks. Here in America, anyway, we have more guns than we have people. And this system is not going to last. Maybe it will for this generation, but it's not going to last indefinitely with a few people getting richer and richer and richer, and millions of people falling behind. There's also this kind of capitalism 101 argument that raising taxes on the rich will decrease incentives for people to like

innovate, right? And what's your response to that? Well, that's just ridiculous. You know, have you ever met anyone who was thinking of starting a new business and said, ah, you know, I don't think I'll bother because I'll have to pay a lot of taxes on my second billion. No. Most people are thinking about not even their first billion, but their first million. I mean, sure, if you were paying 100% in taxes, that would not work. I agree. But we're talking about 2%, 3%. That's an absolutely absurd argument. I've never heard of anybody saying, oh oh i don't want to bother making money on this because i only get to keep 98 of the money what about the argument that a lot of millionaires and billionaires will make um that that by giving away huge amounts of money to charity they're

helping society more than they would be paying more taxes so for example bill gates and warren buffett started uh the giving pledge to persuade fellow billionaires to pledge at least half their wealth to charity. And when the ProPublica report that we talked about earlier came out last year, part of Buffett's response to it was that he's pledged to give over 99% of his net worth to philanthropic causes. You decided to give away 99% of your wealth. The money has great utility to other people. It can buy vaccines. It can buy education. It does me no good. It does them a lot of good. And besides, you know, 20 years from now, I will be in a place where there

will be no Forbes 400. And he said in the statement that, quote, I believe the money will be of more use to society if dispersed philanthropically than if it was used to slightly reduce an ever-increasing U.S. debt. And broadly, what are your thoughts on that argument? Well, I mean, philanthropy is fine. Some of my best friends are philanthropists. I give away some of my money, and that's great. If you give away all of your money, well, you won't have to pay any taxes. You won't have any money. If you gave away half of your money, you won't have to pay tax on that half. You can still pay tax on the other half though. And that's great. I'm all for philanthropy, but it doesn't solve all of our problems. You know, if I needed, if I wanted to get a new

concert hall built, you know, here in New York city, you know, I could probably easily raise a hundred, $200 million, But we also need other things. We need sewage treatment centers. We need schools and neighborhoods where poor people live. You know, we need roads out in the country away from where the rich people are. We need a lot of things. And we live in what we call a democracy. That means decisions made by everybody by voting for their representatives who then go to the halls of Congress or the halls of Parliament and make decisions on what to do. We don't live in an autocracy. That would be the kind of place where the rich people make the decisions on what should be done and what should be done with the money.

I'm, you know, I'm all for philanthropy, but I'm also for everyone paying their fair share. You know, you couldn't run a country club just saying everyone pay whatever you feel like, and you can't run a country that way either. I know that your organization is very involved in politics, particularly in the U.S. So you've supported tax reform initiatives by Senator Bernie Sanders and Senator Elizabeth Warren, for example. But even beyond all the partisan gridlock in the U.S., how possible do you think it is to actually get bills passed that raise taxes on the rich when many members of Congress, both Republicans and Democrats, are worth tens or hundreds of millions themselves? Like when it runs counter to their own interests, is that not a big obstacle in passing it? Is that not a big obstacle in passing it?

Well, I mean, I think that we've made a lot of progress in some sense in sort of moving the window of the conversation. These ideas that were sort of way in the left wing, you know, five or ten years ago are now mainstream ideas that the president of the United States is talking about. So I feel that things are moving in our direction. Yes, you're right. We have not actually seen the laws actually change as of yet, and it doesn't seem like we're going to immediately. And yeah, I can't, I don't really know why. You know, maybe it's because the members of Congress don't want to pay tax themselves. I think a lot of it is because they seem to spend all of their time hanging out with the very rich people because they're doing all of their time doing fundraising and they feel they need lots of money. And they sort of understand the trials and frustrations of being really rich

much more than they in general understand the frustrations of being poor because they don't spend a lot of time with poor people who don't make campaign contributions. I think that's more it. I mean, perhaps I'm being charitable or naive. Part of the problem is that sort of those people who are greedy have much more of an incentive to make their views known to their representatives and much more of an opportunity to make their views known to their representatives than do the rest of the people. And finally, do you think that billionaires or even multimillionaires should even exist at all? So this is an example, but like the average Amazon employee makes $28,000 a year, while Jeff Bezos makes that in like a couple of seconds. So what is even the justification for anyone to have that much money, even if they are paying a wealth tax?

Well, I mean, I don't think there should be some absolute limit on how wealthy you get. I don't think it's wrong for people to be very rich. I just think they should be paying more taxes than regular people. You know, sure, there's no need. You know, once you're a multi-billionaire, having a few more billions is not going to change your life. And so it's not necessary in some sense. But I also don't think it's right to say,

oh, there's some absolute maximum. You're so rich, you're not allowed to be any richer than you are now. So I think that people can build huge fortunes and I think that's good. But I just think those people should be paying a bit more taxes than typical people who work for a living.

All right. Morris, thank you so much for this. Thank you. Thank you. Thank you. Great to be in your show. All right. That is all for today. Front Burner is brought to you by CBC News and CBC Podcasts.

The show was produced this week by Ali Janes, Imogen Burchard, Mackenzie Cameron, Simi Bassey, and Derek Vanderweg. Our sound design was by Sam McNulty and Nooruddin Korane. Our intern is Ben Andrews. Our music is by Joseph Chabison. The executive producer of Frontburner

this week was Imogen Burchard. I'm Jamie Poisson. Thanks so much for listening and we'll see you next week. For more CBC Podcasts, go to cbc.ca slash podcasts.