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interviews

The Poor Subsidize the Giving of the Rich

by Michael Mechanic
May 31, 2021

This interview with Michael Mechanic, senior editor at Mother Jones and author of the new book, Jackpot, was conducted and condensed by franknews.

frank | How did you start writing Jackpot

Michael | Obviously, we are in a strange time in America. It has been called the “Second Gilded Age.” Economic inequality is at staggering levels right now, the gap between rich and poor has grown immensely, and a lot of it is the result of longstanding economic policies.

A couple of decades ago, I had the idea to write a book called Jackpot that would profile different lottery winners, but that was never really workable. First, lottery winners won’t talk to you—they tend to go completely off the public radar. I also realized you’d end up with a lot of repetition, a lot of the same kinds of stories. A more interesting take would be to expand the idea of a “jackpot.” A lottery jackpot is dumb luck—most of us don't expect we're going to get rich by having money just fall in our lap. Instead, we think maybe we’ll start a company, or some kind of fund, or get in on a big IPO, or invest in some other asset that soars in value. I mean, that's how people tend to get rich pretty quickly in America—unless they inherit, which is another type of jackpot. 

I let the Jackpot idea incubate for a long, long time, and I’m glad I did, because the book came out right when everything was coming to a head — we had a pandemic, political mayhem, nationwide protests over racial equity, and just startling inequality. The pandemic came about 80 percent of the way into my reporting. And for the very wealthy, it turned out to be just a speed bump. The billionaires did more than okay. They made a ton of money from it. So, the book really came about at this key moment, and it’s incredibly timely now. 

Were there things that surprised you about the wealth gap?

America kind of woke up to its great wealth disparities in 2011, amid Occupy Wall Street and the aftermath of the Great Recession. That’s when the 1 percent vs 99 percent parlance came into being, even though it now feels like it has been around forever. 

For 10 years now, these ideas have been at the forefront of political speech, with Elizabeth Warren and Bernie Sanders running for president and talking about how allowing billionaires to exist is immoral. And we’ve been hearing lots of statistics, but when you really dig deep, the situation is crazier than you ever imagined. For example, the least wealthy 40 percent of Americans, collectively, have no wealth at all. Literally none. But the devil is in the details, and the details include the nuts and bolts of how these statistics came to pass — things most people are unaware of simply because we don't inhabit these worlds. 

For example, in estate planning, there are trusts called Walton GRATs (grantor retained annuity trusts), that let you pass along billions of dollars to your heirs without paying any inheritance taxes. Republicans are always trying to repeal estate taxes, but the fact is a lot of people are barely paying their estate taxes as is; there are other ways to shuttle money to future generations. 

The degree to which wealthy people are able to do this was a surprise to me, and it came about because Congress made a mistake and never bothered to fix it. And everyone in that world now uses these trusts, which were declared legal in 2000. Facebook executives Mark Zuckerberg, Sheryl Sandberg, and Dustin Moskovitz, all used these trusts to pass crazy amounts of money to their heirs. 

Here’s another fun detail — when I set out, I didn't really understand how regressive sales taxes are.

If you're in the poorest 10 percent of Americans, you spend 10 cents on every dollar you earn in sales taxes. If you're in the 1 percent you spend only a penny or two. 

That’s because items that don’t get taxed are used more by the wealthy. You are not taxed if you buy a box at a Warriors’ game, or opera tickets. But everyday consumables are taxed, so the poor are spending a greater portion of their income. Here’s a funny example: if you buy a bottle of Two Buck Chuck at Trader Joe's, you pay the same tax as the billionaire pays on a $2,000 bottle of Chateau Latour. Because they tax alcohol by volume, not price!

Did you find the infrastructure and tax system in America particularly lenient towards the ultra-wealthy? Was there any comparison to what happens outside of the United States in terms of billionaires?

I focused mainly on America, because if I had expanded the book to include the world, I probably never would have finished. But I did look at differing attitudes about economic mobility and so forth. I cite people like Alexis de Tocqueville, Andrew Carnegie, and Horatio Alger to show how deep these attitudes go in America. We have long considered ourselves this classless, egalitarian society.

We don’t actually believe everyone should be equal, but we do believe that everyone should have equal opportunity to succeed.

And while some people still claim that’s true, well, of course, it isn’t. It is quite demonstrably nonsense.

Leave it to Hollywood to instill a narrative so strong that the poor feel upset at threatening the wealthy. 

There was a funny quote I put in the book that was from Bono of U2. He’s Irish. He was talking to Larry King, and he said, “In the United States, you look at the guy that lives in the mansion on the hill, and you think, ‘You know, one day, if I work really hard, I could live in that mansion.’ In Ireland, people look up at the guy in the mansion on the hill and go, ‘One day, I'm going to get that bastard."

You have argued that the ultra-wealthy make the world worse, not better. Do you have opinions on how wealthy people see their role in civil society and their efforts to participate on a large scale?

I mean, there's a lot to chew on there. Most very wealthy people view themselves as good people. They say they want to do good, and yet they give away their money at a rate at which there is no sacrifice for them.

For people whose main goal is building and protecting their wealth, giving back is something that makes them feel better. 

They might care deeply about some particular cause and want to help. But I mean, think about even the people who've been given the most willingly and generously. Last year, MacKenzie Scott gave away a total of nearly $6 billion. She didn't start a big foundation to exist in perpetuity. She basically got a bunch of people to help her research and figure out which organizations were doing important work, and then funded them without strings attached. It was unrestricted giving, which nonprofits really need. It is also important to give money towards the organizations that are trying to actually create some opportunity and level the playing field, more or less, including some that are doing political action to try and make the tax code fairer. You seldom see that. Most big philanthropy it about giving back to one’s alma mater or towards curing a particular type of cancer that runs in someone's family or funding a new wing in a hospital or museum. These gifts often go to institutions that already have huge endowments and that cater to the wealthy — these aren’t hospitals serving undocumented immigrants. 

And none of that is a substitute for the role of government. You hear rich people say, “the government makes a lousy charity, why would I give my money to the government?” My argument would be that the government isn’t a charity. That is not its role. The government is supposed to be a backstop to help the larger public thrive and to prevent people from falling into despair and poverty—and to reign in unbridled power at the top, but they’ve done a terrible job at the latter. 

Every society sets its own rules. I argue that our tax code is a moral document. It's an expression of our priorities as a society.

If we give someone a tax break, it’s really a statement that we’re trying to reward whatever it is they are doing. 

I mean, look, everyone works hard. Hard work alone does not ensure success. You need to work hard to do really well, but that’s not nearly enough – and it helps when you’re born into the right family, the right city, the right –

The right zip code so you can go to a decent public school. 

Well, that gets to another thing about charity. Public schools in rich areas are well endowed. There are foundations set up in wealth havens like Woodside and Ross, California. A lot of their public schools are much like private schools because wealthy parents create these foundations that pay for supplies and extracurriculars and good teacher-to-student ratios. And because wealthy families get a charitable deduction when they give generously to their school foundations, these public schools are actually subsidized by poorer communities.

I mean, that’s just the way we handle philanthropy in this country: The poor subsidize the giving of the rich. 

When you allow people to accumulate great sums of money, and then actually subsidize their charitable giving, you're actually handing them a great deal of power to make decisions that affect all of us, based on their own personal interests, with practically no public accountability.

Do you think we’ll ever stop ascribing such virtue to wealthy people?

I don't know. Lately, we've seen some attitudes changing. That is partly because of books like, Winners Take All. There is a growing awareness in the philanthropic community that not all philanthropy is good; in fact, some of it is actually damaging and a lot of it is self-serving. 

I just finished Empire of Pain, that new book about the Sacklers, the family behind the OxyContin fiasco. It was just astounding the degree to which the Sacklers used philanthropy to enhance their power and status. They were able to keep themselves out of prison because of the high-level connections they cultivated. When prosecutors were prepared to indict family members on felony charges and had a pretty airtight case, the Sacklers hired people with high-level connections in the Justice Department to put the kibosh on it. Philanthropy was yet another business proposition for them — they weren’t giving because they were nice. 

You mentioned Anand Giridharadas and I know his work, and I think it has a certain reach, but our culture is still reverent to the wealthy. Do you think the culture will break?

It's a hard question to answer. I can only tell you what I wish would happen, but I don’t know that the things that I see in America give me much hope. 

The final chapter of my book ends on a fairly hopeful note, and I sort of struggled with that. Here we are at the nexus of racial reckoning and political changes and a pandemic laying bare the inequality in our society. 

There's a contingent of people whose eyes have been opened, that actually are doing substantial things to check their privilege, you could say, and putting their fortunes and efforts towards things that could help change the unfair structure of our society.  

But then, you know, I look at all these people supporting the big lie of election fraud, and denying what we can see with our very eyes—when I see people put those kinds of blinders on, it doesn't give me a lot of faith that our society will be changing that much, or that quickly. 

I'm not sure there really was a reckoning. 

That's a fair point. There certainly was for some people. But will it last? 

I mean, you’ve got people like Darren Walker, president of the Ford Foundation, who are trying to push the charitable world in a new direction, but you also have people like the Kochs who do their best to subvert the will of the people, and who are giving a ton of money to push the myth of free enterprise — there is really no such thing in America. Our government subsidizes fossil fuels — the Kochs’ core business — more than it subsidies green energy. 

Have you seen effective giving of excessive wealth? 

Well, sure. But just as we have a liberal/conservative divide, we also have a divide between wealthy and non-wealthy in terms of our values. We see wealth-related differences in voting patterns among Democratic members of Congress. The wealthier they are, the less likely they are to vote for bills that would reduce income inequality, things like raising the minimum wage or increasing taxes on the highest earners. And when researchers ask regular people about their political preferences, there's a clear gap between what the wealthy want and what the public wants. 

I didn't want to write a polemical book, one that says rich people are bad. I don’t think they are implicitly better or worse than anyone else. We all tend to act in our self-interest, and it’s just that we have a system that particularly rewards the self-interests of the very wealthy. So I approached them with an open mind. I wanted to understand their worldviews and their problems—and these problems are very real. Wealth can make some personal problems a lot worse, and create other problems—especially with relationships and family and the ability to trust others—that most of us don’t experience. Anecdotally, you hear that a lot of billionaires are actually pretty miserable, and I think I can understand why.