Putting a Limit On Wealth

Stephen H. Unger
December 30, 2015

The power of money in politics has increased greatly over the years. A 2010 Supreme Court decision aggravated the situation by ruling that spending money in an election campaign is a form of speech, and is protected by the First Amendment [1]. It is now common for a candidate for a seat in the House of Representatives to spend over a million dollars campaigning. A Senate campaign can easily cost ten times that amount. In the 2012 presidential campaign each major party candidate spent about a billion dollars [2][3]

But direct expenditures by candidates and political parties constitutes only the most obvious part of the flood of money involved in politics. The mass media, principally newspapers, radio, and TV, play perhaps an even greater role in elections. Those who own the media, the very rich, have an enormous effect on election outcomes. Ownership is the simplest, most obvious way that money is used to control the media, but is not the only way.

One obvious way to funnel money to a newspaper, for example, is to buy advertisements. A threat to cancel ads is a powerful tool for influencing the presentation of political news and the editorial policies of the various news media. Big money interests can use direct and indirect bribery to control the behavior of key people in the media (or in any other field). Apart from crude methods such as giving them bundles of cash, they, or their relatives, can be given cushy, well paying, full-time, or part-time jobs, or paid as consultants, or given opportunities to buy real estate, or commodities, at bargain prices, or lucrative stock market tips, or loans with very low interest rates, or opportunities to give talks for high fees at luxurious resorts. Most of these tactics are perfectly legal, and many are difficult to detect.

Money versus democracy

In an ideal democracy, every citizen can try to influence government behavior. The extent to which people wish to do this varies greatly. At one extreme are those who don't care at all about such matters, and don't even bother to vote. At the other end are people eager to devote a lot of time; in extreme cases to work to elect favorite candidates, or even to seek public office themselves. There are also great differences in various abilities that affect the extent to which their efforts might have any effect. In a real democracy, no limits are placed on the amount of time and energy that willing people may devote to a political cause.

But, in practice, personal abilities, and the extent of people's willingness to spend time and energy, is usually less important than their ability and willingness to spend huge sums of money to influence election outcomes. A person with assets exceeding $20 million, who felt strongly about the outcome of some election, say for a US senate seat, could spend several million dollars supporting a favorite candidate , and very possibly succeed. As mentioned above, the money could be used in many ways, only one of which would be in the form of campaign contributions. How could this be prevented?

Any law restricting the extent to which the owner of a periodical could commission articles that would help the election campaign of a candidate would almost certainly be ruled unconstitutional. In the past, there were laws or regulations requiring operators of radio or TV stations to give rebuttal time to people who were attacked on the station. These were hard to enforce, and no longer exist. So, what can be done to counter excess power of the super-rich?

Defending democracy

The more wealth the super-rich possess, the more power they have, and the more they can use their power to acquire even more wealth. This is perhaps why the super-rich are relatively a lot richer now than they were 2 decades ago. (A case can be made for structuring our tax system so as to distribute the financial burden of government more equitably, or to reduce gross income inequality as a matter of justice [4], but I consider these to be different issues and won't deal with them in this essay. The subject of the discussion here is how to reduce the great political advantages associated with massive wealth.)

How much is too much?

My contention is that the only way to stop the super-rich from dominating the country to an even greater extent than they do now, is to impose income and wealth taxes sufficient to reduce their fortunes and incomes enough to curb their power. I don't have an easy answer to the question of what limits should be set to achieve this purpose. Obviously, proposing too low a limit would provoke great opposition and receive too little support. A limit that is too high would fail to accomplish the objective. E.g., A person with assets of $100 million could, without great pain, spend several million dollars annually to promote political causes. So, I will make an initial proposal and invite discussion of alternatives. (I promise not to begin implementing the de-monetizing process until readers have had a chance to present counter-proposals!)

Reducing a person's assets from, say, $10 billion to $20 million, and limiting annual income to $1 million might sound outrageous. Perhaps cruel! But is it really all that terrible? How would it change the life of that person? Obviously it would not affect security, or health, or the ability to lead a comfortable, even luxurious, life. The only use for additional millions of dollars would be the ability to exercise more power, or to indulge in outlandish luxuries, such as owning several lavish homes in diverse places, or owning a jet airplane. The monetary loss might be perceived as a loss of prestige. But the last point would perhaps be softened by the fact that the same treatment would be inflicted on all other super-rich people, so there would generally not be much of a loss in standing. There are, very roughly, about 160,000 American families with assets over $20 million [5].

The idea of very steep taxes on high incomes is not new. During WWII, the tax rate for the highest bracket was raised to 88%, and then to 94% for 1944 and 1945. From 1946 thru 1963, the top rate was 91% [6]. (It is interesting that our economy functioned relatively well during that two-decade period.

But, an important consequence of the control of government by wealthy people is that the tax rates of the 50's and 60's now constitute an interesting historical anomaly. The current tax on the top bracket (over $413,200) is 39.6%. But the very rich don't generally pay at this "high" rate. the average combined top marginal tax rate in the US on long-term capital gains (including average state taxes) is 28.6 percent. There are also many techniques used by the rich to minimize their tax bills, which I will not try to describe. But the overall effect is indicated by the fact that, in 2009, the tax bills for the top 400 earners in the US averaged about 19.9% of their incomes, which averaged about $200 million/year. [7].

Getting the job done

Since devising and implementing methods to avoid (or greatly minimize) paying taxes is a major activity of the very rich, which provides employment for many bright people, drafting, and getting passed and enforced, effective laws for capping super-high income and wealth would be a truly herculean task. We could anticipate all-out opposition from the world's most powerful people. Even the weak laws we have today are commonly circumvented via a variety of techniques [8].

Assume, for the moment, that, via some political miracle, a steeply graded progressive income tax law was passed, along with various taxes on wealth, that could bring about the capping of income and wealth suggested above. Currently, many very rich people and corporations (e.g., American Express, Apple, and Microsoft) keep a large portion of their assets (totaling many trillions of dollars) in offshore tax havens such as the Cayman Islands, and Ireland, where taxes are non-existent or very low [9]. Unless there are appropriate changes in our laws, we can expect that an immediate result of the kind of tax increases discussed above would be an acceleration of this process. So, in addition to raising or creating taxes, it would be necessary to pass laws that would discourage the transfer of large amounts of money in and out of the country. An article by a prominent sociologist [10], is rich in information pertinent to the subject of this article. A recent NY Times article is very relevant [11].


Given the current composition of the US government (all branches), there is no possibility of enacting any of the measures discussed above for reducing the power of the super-rich, who are virtually in complete command. Those now ruling the country are not going to give up their power voluntarily, or allow the bulk of their financial assets to be taxed away. The best that can be done now is to improve our understanding of the problem and conceivable solutions, and to try to get more people thinking about the issue and to realize the need for real change. Perhaps, when the median income gets below some critical point, enough people will feel the need to take real political action.


[1] Wikipedia, "Citizens United v. FEC"

[2] , "The 2012 Money Race: Compare the Candidates", NY Times

[3] David Knowles, "U.S. Senate seat now costs $10.5 million to win, on average, while US House seat costs, $1.7 m", New York Daily News, March 11, 2013

[4] Michael Greenstone and Adam Looney, "Trends", The Milken Institute Review, 2011

[5] Chris Matthews, "Wealth inequality in America: It's worse than you think", Fortune, October 31, 2014

[6] Tax Foundation Blog, "U.S. Federal Individual Income Tax Rates History, 1862-2013 (Nominal and Inflation-Adjusted Brackets)", Tax Foundation, October 17, 2013

[7] David Cay Johnston, "The fortunate 400:", Reuters, Jun 6, 2012

[8] Alexander Arapoglou and Jerri-Lynn Scofield, "10 tax dodges that help the rich get richer", Salon, April 12, 2013

[9] RT, "'Shocking abuse of public trust': Columbia University prof estimates $20tln hidden in tax havens", RT, Jan., 2014

[10] G. William Domhoff, "Wealth, Income, and Power", "Who Rules America, February 2013

[11] Noam Scheiber and Patricia Cohen, "For the Wealthiest, a Private Tax System That Saves Them Billions", NY Times, Dec. 29, 2015

Comments are welcomed and can be sent to me at unger(at)cs(dot)columbia(dot)edu

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