How much is too much? The growing backlash against wealth

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Last week, as bolts of outrage generated by the federal government’s rewiring of the capital-gains tax continued to flash in all directions across the sky, The Very Very Rich Guy called and explained how long it takes to spend half a million dollars in the Louis Vuitton store.

The Very Very Rich Guy – he won’t talk to me if I use his real name – is a Toronto business person of galactic wealth, both inherited and self-made: He runs a manufacturing operation that employs hundreds of Canadians. And while he’s deeply generous, and has handed millions to hospitals and libraries, to name a few of his enthusiasms, he also loves to shop. For clothes, in particular.

“It’s not that difficult to spend a million a day to help people,” he said over the telephone. “It’s not at all difficult to spend a million a day to invest. But it’s hard to spend that much on yourself. You go to the Louis Vuitton store, you’d have a hard time spending half a million.”

“Huh,” I said. Even walking past the Louis Vuitton store gives me chest pain.

“It’s true,” the VVRG insisted. “Say each item you buy costs $10,000. They have to open the package, you have to try it on. That already takes 15 minutes. That’s four bags an hour, or $40,000 an hour. If you’re there all day, eight hours, you’ve still spent only $320,000.”

His point is that the world’s wealthy can’t possibly spend their majority share of the world’s wealth on themselves – but if we tax that wealth too heavily, they’ll stop investing it as well. Chaos will allegedly ensue: capital and jobs and productivity and prosperity will all go bye-bye. That’s the official line of the business class.

I like the VVRG. He spends a lot of money on what I consider fripperies (as does billionaire Ankur Jain, the chief executive of Bilt Rewards, who rented the pyramids at Giza last week for his wedding to former WWE wrestler Erika Hammond). But I admire his enthusiasm for the full range of human desire. More to the point, he and his ilk pay a lot of tax. In 2021, the top 1 per cent of Canada’s income earners – 292,560 people who earn an average of $579,100, accounting for 10.4 per cent of all income from tax filers – paid 22.5 per cent of all income taxes. The top 10 per cent paid more than half of them (54.4 per cent).

Perhaps you have noticed the anti-capitalist tang in the air. Last week’s bump-up of the capital-gains tax, to say nothing of the positioning of the federal budget as a declaration of class warfare intended to appeal to younger left-wing voters, is just the tip of the spear. This week, four countries in the Group of 20 floated the idea of imposing a 2-per-cent wealth tax on the world’s 3,000-odd billionaires (more than half of whom are American). Joe Biden has mentioned a wealth tax; it complements U.S. Treasury Secretary Janet Yellen’s proposal to levy a 15-per-cent tax on multinationals. There is mounting pressure to properly tax the digital economy as well. The Wall Street Journal, unable to contain its anguish, lamented the arrival of “our new socialist age.”

The wealthy have a lot to answer for. Inequality has been widening for years. This is especially true of wealth (what you own): In Canada, the wealthiest 10 per cent own 56 per cent of the country’s wealth, and the wealthiest 1 per cent own more than a quarter of it. Meanwhile, the bottom half gets to drink less than 5 per cent of the cream and five million Canadians live in poverty.

Is that shameful? Or is wealth inequality simply the natural byproduct of capitalistic daring, as investors have long maintained in defence of aggressively trying to pay as few taxes as possible? It depends who you ask.

A London School of Economics study of 18 OECD countries between 1965 and 2016 found that tax cuts for the rich “push up income inequality” while producing “no significant effect on economic growth or job creation.” Joseph Stiglitz, who won the Nobel for economics, has concluded that wealth inequality reduces economic opportunity and shrinks public investment.

“I think it’s possible to have too much money because it’s impossible to spend it,” Dr. Jayati Ghosh, a renowned economist at the University of Massachusetts at Amherst, told me the other day. “But the thing you can spend it on is lobbying for legislation and regulation that will keep providing you benefits. That’s what is so dangerous with extreme wealth. It’s not just that you create an oligarchy. It’s that you get a plutocracy, and the rule of the rich, no matter which government is in power.” With baby boomers pegging out and the global economy on the verge of the largest generational asset transfer in history, that plutocracy is about to renew itself.

Prof. Ghosh wants a 2-per-cent annual tax on all wealth over $100-million, which (she claims) will round up $240-billion a year. “It’s a stock market fluctuation,” she says. “They won’t even notice it.” Of course, it’s easy to say that about someone else’s money.

But Prof. Ghosh is a patsy next to other soldiers in the tax-the-rich brigade. Dan Hoyer, a “complexity scientist” in Toronto, is one of 200 members of Resource Movement, “a community of young people with wealth and/or class privilege working toward the redistribution of wealth, land and power,” to quote its righteous website. Prof. Hoyer and his partner are in the top 2 per cent income-wise: combined annual income of just over $200,000 and owners of a condominium in Toronto, purchased with a parental loan and still mortgaged. He’s 41. Listening to Prof. Hoyer, you’d think he was swimming in riches. “Our money makes money,” he told me. “Investing in businesses that then make more money for you and others like you is the same as hoarding.” It’s also capitalism.

To break that cycle, he wants Ottawa to step in and impose a 2-per-cent wealth tax, even on assets as modest as his own. Is the federal government – or any government, for that matter – with its wobbly record on inflation and productivity and spending, the best choice to manage a massive wealth transfer? It depends on who you ask, but Prof. Hoyer and people like him tend to think so. “The scale of the problem we’re facing” – wealth disparity, climate change, populist barbarians at the gate – ”means government is the only way.”

So how much money is too much money? Thank you for asking! The current Buddha of the cap-the-rich movement is Ingrid Robeyns, a professor of ethics at Utrecht University and the author, in January, of Limitarianism: The Case Against Extreme Wealth. It’s a bracing, scolding read.

Prof. Robeyns is unforgiving in her dissection of the ethics of extreme wealth. She splays out the extent of wealth disparity today (at one point observing that the “lifetime hourly-wage equivalent” to amass Elon Musk’s $219-billion would be $1.9-million-an-hour, working every working hour for 45 years). She traces extreme wealth’s often criminal origins, claims that it undermines democracy, does not believe the superwealthy deserve their fortunes, and insists philanthropy is no substitute for a hard cap on wealth. “Our social contract,” she writes, “does not really put equality and social justice first. We live by the principles of economic efficiency, and of ‘to each according to what they can extract from others.’”

She thinks $1-million is as much wealth as anyone needs. She allows that $10-million is probably more politic. She draws an absolute line at $20-million – whether it’s dollars, euros or pounds sterling. Every investor I spoke to this week disdained the idea as draconian and counterproductive. Quelle surprise.

There’s at least one solution to wealth inequality, one which has a track record and won’t set off a class war, that hasn’t come up much in the recent tax Sturm und Drang: employee ownership trusts, or EOTs, in which business owners lend their employees the money to buy their companies, making employees the owners themselves.

Bill Young, the former CEO of Hamilton Computers, is the founder of Social Capital Partners, a non-profit that specializes in EOTs. After three years of lobbying by Mr. Young and his partners, Chrystia Freeland’s recent budget finally included capital-gains concessions designed to encourage business owners to embrace EOTs. There are already 6,500 such companies in the U.S. whose 15 million employees have seen $2.1-trillion in wealth created over 40 years – about $150,000 a person. It’s not Bezos Bucks, but it’s wealth. Such companies perform better and grow faster and are more profitable. “Not only is it a great solution to wealth inequality,” Mr. Young explained. “It’s a great solution to our productivity problem.”

If there were more of them, more of us might be wealthier. It’s unlikely we’d have enough to buy out Louis Vuitton or rent the Sphinx to get married, but more of us might start to think like multimillionaires. I ran into one the other day, and asked him how much money was enough money. He hesitated, at first. “It’s hard to think,” he said, eventually, “how you could possibly need more than 10 or 15 million.”

He has that, and more.

Editor’s note: A previous version of this story incorrectly said that Dan Hoyer and his partner own a multimillion-dollar home in Toronto. This version has been corrected.