America has no nobles. How much noblesse oblige?

By , Staff writer of The Christian Science Monitor

IT'S an age-old American question - with an urgent new twist: Do the country's richest citizens owe an extra debt to society? Does the crystal-and-caviar class have a "peculiar obligation," as Theodore Roosevelt put it, to help the struggling masses? Or in its newest iteration: Should the legions of dotcom millionaires - who got rich in the gilded '90s - pitch in during the slumping '00s?

Some states say yes, and are moving to hike taxes on their wealthiest citizens. Also in the "yes" camp are those who say a growing rich-poor divide demands that the rich shoulder extra burdens. President Bush in effect disagrees, opting recently to pitch new tax cuts that help the wealthy along with the masses.

Much of the debate is driven by financial imperatives: States must balance their budgets, and Mr. Bush seeks to spur a weak economy. But behind it lies a larger philosophical tension over the role of the rich in America - one that goes back to the days when colonists put powder on their wigs and in their muskets.

Recommended: Could you pass a US citizenship test?

Among the latest moves:

• Connecticut will likely pass a "millionaire tax" to help fix its fiscal troubles. California, New Jersey, and other states may follow suit.

• Bill Gates Sr., father of the world's richest man, is stumping to stop repeal of the federal estate tax, which targets the wealthiest 2 percent of American families.

• California Gov. Gray Davis's new budget would squeeze the state's richest 59 school districts especially hard. Other states' cuts may be similarly skewed.

Critics say targeting the rich stifles society's proven wealth builders - and job creators. President Bush argues that cutting taxes on the wealthy will spur a national recovery that will benefit everyone. Furthermore, in a society that prides itself on equality and opportunity for all, singling out any class for extra duty can be uncomfortable. And in America, there's a cultural aversion to picking on the rich.

"We haven't institutionalized envy in the United States," says California State Librarian Kevin Starr. "You'd think the middle class would be infuriated by the salaries of its favorite basketball stars and baseball heroes."

Rather than begrudging the wealthy, many middle-class Americans hope to become rich themselves.

It's one of Americans' strongest cultural traits, says Robert Reich, the former Clinton labor secretary: "We are individualists. We credit or blame ourselves" - not others - "for where we stand in the social order." But, he says, "there are limits - and we may be reaching those limits."

On one level, the limits are economic, as states face budget crises. Connecticut, for instance, faces a combined $2 billion budget gap over the next two years. Conservative GOP Gov. John Rowland is leading the "millionaire tax" charge. By boosting the levy on million-dollar incomes by one percentage point - to 5.5 percent - the state could get $100 million this year, $170 million next year.

The idea is popular: A University of Connecticut poll last month found that 88 percent of state residents support the new "millionaire tax."

The risks of the strategy are serious: The state's economic elites could begin to move - or simply change their legal residences to Florida, Wyoming, or Nevada, which have no income tax.

Yet targeting the affluent is tempting - as there are so many newly rich.

Nationwide, in 1995, for instance, 4 million individuals had incomes of between $100,000 and $200,000. By 2000 roughly 8 million had that income, according to the Internal Revenue Service. In 1990, the number of individuals with incomes of $1 million or more was 60,677. By 2000, nearly six times that many - 239,685 - had million-plus incomes.

Or there's Forbes magazine's list of the 400 richest Americans. In 1990, it had 66 billionaires. By 2000, it had 298.

THE ranks of the rich and super-rich have thinned significantly since the dotcom bust. The Forbes list for 2002, for instance, has just 225 billionaires - 73 fewer than in 2000. But for Mr. Gates, that's still too many - especially if they're not paying an estate tax. For one thing, he says, they owe the government for funding America's great progress and stability - by paying for university research, the military, and more. Without the government, he argues, there would be no Internet, no software industry, and slower economic growth.

"The federal government is the venture capitalist of this world," he said in Boston recently. Most of its investments fail, "but some of them work - and, boy, do they work well." He quoted his friend Warren Buffett saying, "There's no way I would enjoy what I enjoy if I had been born in West Africa."

Yet critics say taxing the rich more than other groups handicaps the economy's strongest players. The estate tax is "an incentive to retire early," says supply-side economist Alan Reynolds, who has taken his analysis to heart. Ever since his net worth hit "between 4 and 5 million" he says he has deliberately slowed down - selling his consulting business in part so the government won't take so much of his money. "I've got 12 cylinders, but I'm only operating on 4."

If anything, the rich should keep their money so they'll create more wealth, says conservative historian Dinesh D'Souza. It's a question of who will do more good with the money - the government or people like Bill Gates. "By and large I probably trust Gates more to do good with it," he says.

And certainly the wealthy can do good through philanthropy. Many newly rich are following Gates's lead and setting up charitable foundations. But liberals like Mr. Reich warn that charity doesn't meet the masses' needs. Much of it, he says, "ends up in cultural palaces that the wealthy conspicuously visit."

And for Bill Gates Sr. - who runs his son's $24 billion foundation focused on world health - wealth concentration is more than just an economic argument. It's a cultural-political one.

Too much concentration, he argues, risks creating a plutocracy that can skew the entire system against opportunities for the masses. But America is moving in that direction. A key federal indicator of wealth concentration - the Gini index - shows gradually growing wealth concentration since the 1970s - and a big jump in the 1990s. The index works like this: 1.000 represents all the money in the country being held by one person, while 0.000 signals absolute equality among all citizens. For household income in 1970, the index was 0.394. In 1980, 0.403. In 1990: 0.428. In 2000: 0.460.

Some think the power concentration is already too strong - and that there's potential for a rebellion akin to the progressive movement at the turn of the last century.

"If this year is in the pits economically, you're going to start to see an impact," says Republican sage Kevin Phillips, a critic of the Bush tax cut. The drop in pension security, corporate corruption, and big money in politics all provide fodder. If any politicians can frame these issues, he says, "They could really get somewhere."

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...