Wealthy America Can Fix Climate

Wealthy America Can Fix Climate

December 19 2024

It’s not well appreciated just how wealthy America is. The collective net worth of all American families (their investments, and homes, plus all other assets, minus liabilities) is $150 trillion. With 335 million Americans, that’s an average of about $500,000 per person. Only Switzerland exceeds the US with over $600,000 for each of its 9 million people. Now, 800 American billionaires control $6 trillion in wealth (while 35% of Americans live paycheck to paycheck with less than $50,000 of annual income.)


What if the really wealthy Americans were to put their wealth to work on the energy transition? Now would be a pretty good time to do that. It turns out the climate scientists were too conservative: drastic climate change consequences are accelerating just as the Trumpian naysayers are in full ascendance.


What could the super wealthy spend? The misnamed Inflation Reduction Act passed under Biden was mainly about providing federal funds/capital for the energy transition to the tune of about $350 billion (plus two or three times that due to the multiplier effect). The Act is credited with doing what it was designed to do: rapidly accelerating the energy transition with large investments in clean energy infrastructure, especially in red states. Not only will the Act speed emission reductions in the US, it will finally help US companies compete in the major growth industries of the present and future: solar power, wind energy, batteries for storing energy and electric vehicles. We were on the verge of ceding these industries entirely to China. Now there’s hope.


What if we could add another trillion federal dollars to the IRA’s $350 billion and thereby triple the IRA’s impact? The immediate push back would be that the federal government already has $35 trillion in national debt combined with ongoing federal deficits of $1.5 trillion per annum. The federal till has run dry. We mostly fund the US government with personal income taxes and social security and medicare taxes on what Americans earn from their jobs. Trump cut corporate income taxes in his first term and wants to cut them further. Suffice to say that more FEDERAL spending of hundreds of billions (or even trillions) to accelerate the energy transition is a nonstarter if we just tax Americans’ annual income.


What if, instead of the government, America’s super wealthy, the ones with over a hundred billion dollars each, decided to pitch in. In 1997, Ted Turner donated the then inconceivable amount of $1 billion to United Nation causes and called it “the best investment I’ve ever made.” Today, Elon Musk is worth $450 billion, Bezos $240 billion, Zuckerberg $211 billion, Ellison $188 billion, Buffett $140 billion, Brin and Page $328 billion, Balmer $152 billion, Gates $162 billion and Bloomberg $105 billion. Collectively, they are worth $2 trillion! There are a further 10,000 centimillionaires (with more than $100 million) in the US.


What if these guys voluntarily invested 99% of their net worths (leaving each with a mere billion to live on) and put it to work on climate? What are the chances of that? Pretty low, we guess. They are mostly hard wired to work and make money, not give it away. Enough for most of them is never enough. Sure, most of them “give” chunks of their wealth to personal charitable foundations (at least partly to avoid paying taxes) but those foundations only need to deploy 5% of their value annually. Annual investment returns on foundation assets usually outstrip outgoing distributions for the public good.


This is why there’s talk of a wealth tax in America: the logic being that if the US needs more tax revenue, then it should go where the money is and tax it. In a country with $150 trillion of aggregate wealth, finding another trillion or so each year to help fund the government seems reasonable. The push back here is that you should only tax money once, when you make it (through income tax) and not again once you have it. But there’s plenty of evidence that many Americans become very rich without ever paying much in taxes. The big driver of this untaxed wealth creation is equity (stock ownership) in public and private companies by founders and senior executives. Those gains in value on their equity positions are only taxed when there’s a “realization” of the gain, which occurs when the owner sells the stock. They don’t sell stock unless they actually need the money for something, and it’s tough to spend more than a few million each year on houses, cars, boats, planes and vacations. (There’s already, by the way, strong precedent for taxing wealth in the US: state and local governments largely live on real estate property and sales taxes.)


The plan by the Democrats coming into the election was for Americans with at least $100 million in net worth be required to pay a tax on the amount of unrealized gains achieved during the tax year. That’s unlikely to happen any time soon. Trump and Musk are perfect examples of billionaires who have paid minimal taxes while amassing huge fortunes and they want to keep it that way. Rather than making very rich people pay taxes, they say they want to bring down deficits by getting rid of wasteful federal spending. To really make a dent in federal spending, however, they’ll have to cut social programs that benefit the 30 or 40 percent of Americans with low and modest incomes who largely voted for Trump. We don’t think that’s going to work. So, the federal government will continue to be relatively poor, running up deficits and debt.


So, it falls to the super wealthy to do the good work. What legacy do they want to leave their kids and grandkids beyond a fabulous inheritance? They’ll be remembered far more fondly if they put their wealth to work solving the biggest problem on the planet.

December 4 2023

In his second dispatch from COP28, TCC Senior Editor David Kirkpatrick reports on the danger of missing the boat on climate investing.

September 14 2021

A Carbon Tax has won widespread support from both conservatives and progressives. This excellent Boston Globe article, reprinted here with kind permission from the authors, explains why.

February 6 2021

Yesterday it was Will Ferrell, America and GM. Today it’s Tormund Giantsbane, Norway and Audi. This entertaining EV battle is heating up.