- [Julia] Thank you to Brilliant for supporting PBS.
- Hey, hun?
- Yeah?
- What would you do with a billion dollars?
I think I'd spend one third on fighting poverty.
One third towards medical research,
and one third on reversing climate change.
- [Spaceship Operator] T minus five, four,
three, two, one, lift off.
- [Phillip] Woo!
- Philip?
- Yeah, what you said.
(upbeat music)
What does it mean to be a billionaire?
It's not someone who makes a billion a year
or has a billion in cash stored away somewhere,
like some people believe.
Instead, a billionaire is someone
whose net worth is at or above $1 billion.
Meaning, after subtracting their debts and liabilities,
their assets add up to a billion or more.
Assets can include cash, real estate, stocks,
and pretty much anything that is valuable enough
to trade in for money.
- As of 2021, there are 2,755 billionaires in the world.
Which is 660, more than last year.
Their net worth can fluctuate, but as of early November,
Elon Musk was in the top spot with a staggering 307 billion.
He recently eclipsed the current runner-up
Amazon founder, Jeff Bezos.
Over the last year, these men have made money so fast
that if they saw $1,000 lying on the ground,
it literally would not be worth their time to bend down
and pick it up.
- Billionaires have more money than anyone
could reasonably spend in a lifetime,
leading many to wonder is it evil to be that rich?
This is a complicated question
that could cover several episodes.
And because it's about ethics, it's fairly subjective.
But we'll look at some of the main arguments in this debate,
give our thoughts and then let you decide.
- First, let's look at the wealth gap
between the richest and poorest people in America.
Economic inequality more than doubled between 1989 and 2016.
Jeff Bezos, Bill Gates and Warren Buffett,
collectively own more wealth than the bottom half
of all American households.
That's more wealth held by three people
than by over 160 million.
During the first year of the COVID-19 pandemic,
billionaires grew 54% richer
while the number of people in poverty around the world
increased by over a hundred million.
- Some defenders of billionaires argue that they deserve
their wealth because of all add to society,
like job creation.
For instance, Amazon currently has
about 1.3 million employees around the globe.
But are those jobs really new
or just shifted from the thousands of small retailers
that have gone out of business
during Amazon's rise to dominance?
- While there's no way to assign an exact amount of blame
for other companies' demise,
there is no doubt that giant retailers
like Amazon and Walmart steer customers away
from smaller companies.
And whether you're a billionaire business owner
or a billionaire hedge fund manager,
the easiest way to make money is to ensure that
you are hiring as few people as possible
at wages that are as low as possible.
- According to the small business administration,
firms with less than 500 employees are responsible
for creating almost half of new jobs.
So, even though giant companies undoubtedly
add jobs to the economy, they are by no means the only ones.
- Okay, so what about innovation and convenience?
It's hard to deny that Amazon has made shopping
a lot quicker and easier.
And if they're $386 billion in sales last year
is any indication,
the service Amazon provides is quite popular.
Jeff Bezos certainly deserves some credit for that,
but does he deserve all of it?
- After all, it's not like he came up with the idea.
People have been predicting the advent of online shopping
for decades.
The technology that finally made it possible, the internet,
was originally developed with taxpayer dollars.
And the physical infrastructure depends on
roads, bridges, electrical grids, also paid for by taxes,
AKA you and me.
It's safe to say that if Jeff had never been born,
we'd all still be buying our books, batteries
and bug spray, online.
- We're not saying he doesn't deserve to be rich,
he built a company that a lot of people use and like,
which no one would do without a financial incentive.
But when you take into account just how many people
helped earn those billions, it seems a bit lopsided.
- That's why some politicians are pushing
for a 70% income tax on the ultra wealthy,
to help close the inequality gap.
Now, that number might sound high,
but it's actually much closer to what it was
between 1932 and 1981.
During that time, the top tax rate never fell below 63%,
and rose as high as 94%.
Some are also pushing for an additional wealth tax
of up to 6% on billionaires,
which would tax all assets in their net worth.
- Sounds great in theory,
but there's no guarantee it would work,
since billionaires are notorious for dodging taxes.
The lawyers, consultants and accountants
that make up the so-called wealth defense industry,
can find tax breaks and loopholes, hide money offshore,
and employ other tricks that are technically legal,
but no doubt sketchy.
Bringing billionaires to an income tax bill of,
well relatively zero.
- One of the sneakier ways billionaires avoid taxes
is by taking out loans.
Yes, you heard that correctly.
The ultra wealthy borrow money, lots of it.
Not because they need to like regular people,
but because it allows them to access their wealth
without technically producing income.
- Here's how it works.
If a billionaire takes out a huge salary,
they'll pay a 37% income tax on a bulk of it.
Which is why so many of them pay themselves low salaries.
For instance, Jeff Bezos's base salary at Amazon in 2020
was $81,840.
His real wealth is in the value
of all the Amazon stock he owns, which increases every year.
But if he ever sells any of that,
to say buy a boat or a new house,
he'd have to pay 20% in capital gains tax.
- [Phillip] Instead, what he and many other billionaires do,
is take out low interest loans to finance
their luxurious lifestyles.
Loans are not considered income by the IRS
and they can even write off the interest as a deduction.
When that loan comes due,
they'll take out another one to pay the first one.
They can keep this going basically until they die,
since who would ever deny a loan to a billionaire?
- But let's assume for the sake of argument
that there is a billionaire out there
who's paying their taxes and not exploiting anyone.
Are they evil just for having that much money
when there's so much poverty, disease and calamity
in the world?
Well, not if they're helping to do something about it.
And we can't deny,
there are some very charitable billionaires.
Warren Buffett has given $42 billion in his lifetime.
Bill and Melinda Gates have given 30 billion.
Some billionaires have even given so much
that they're not billionaires anymore.
- But the fact of the matter is,
for every charitable billionaire,
there are far more hoarding their money.
Only 223 billionaires, less than 10% of them,
have signed The Giving Pledge,
a promise to give away a majority of their wealth
to charity or philanthropy during their lifetime
or in their wills.
And Jeff Bezos is not one of them.
Though his ex wife McKenzie Scott, did sign the pledge,
and has given away over 5 billion since their divorce,
leaving her with a paltry 55 billion. Sad.
- But even if every billionaire gave away
half their money to charity,
we're still letting a handful of unelected people,
decide which causes are worthwhile and which aren't.
Ideally, a representative democracy like ours
would use taxes and elections to give the people
at least some say in how our excess wealth
should be allocated.
- Don't get us wrong, the issue is not black and white.
It's not like there's some specific dollar amount
where a plucky entrepreneur suddenly becomes
a scheming super villain.
Capitalism isn't perfect,
but it's a system that allows people
to reap the benefits of their risks and hard work,
and has lifted millions out of poverty
in the last hundred years.
- That's why some economists say that
holding billionaires accountable is actually a defense
of capitalism.
The scale of inequality in America today,
is virtually unprecedented.
When so many families are struggling to make ends meet,
when so many schools and public programs
are starved for cash.
Meanwhile, half the nation's wealth
is being hoarded by a handful of people.
Well, that's when citizens start to feel like
their economic system has failed them,
and they either want to fix it or look for another one.
And that's our two cents.
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For more about how wealth affects your psychology,
check out our video: Does Wealth Make You Meaner?
(upbeat music)