The COVID-19 pandemic may have sickened much of the global economy last year, but the financial health of most of America's wealthiest persons has improved significantly as the stock market has rallied from its lows of a year ago.
The combined wealth of the nation's 657 billionaires increased by more than $1.3 trillion, or 44.6%, since the pandemic lockdowns began a year ago this week, according to a study released Tuesday by Americans for Tax Fairness (ATF) and the Institute for Policy Studies (IPS). The ranks of America's billionaires added 43 more members in the past year, including Mohawk Industries CEO Jeff Lorberbaum who benefited by the nearly tripling of Mohawk's stock value in the past 12 months.
The shutdown of restaurants, retailers and other businesses to limit the spread of the coronavirus triggered the sharpest economic contraction in modern American history last spring when the gross domestic product - the broadest measure of economic activity - shrank at an annual rate of 32.9% in the second quarter. The economic contraction pushed nearly 80 million persons out of work sometime in the past 12 months and forced the closing of thousands of businesses.
But the monetary and fiscal policies adopted by the Federal Reserve Board and Congress in response to the economic downturn have helped not only the U.S. economy to survive. The stimulative moves have also helped the stock market to thrive.
After the stock market fell by more than 34% in the month leading up to March 18, 2020, the stock market has rebounded and grown by more than 75% in the past 12 months.
Most investors in the U.S. stocks have benefited by the market gains in the past 12 months, but few as much as the nation's top billionaires.
"The pandemic has created an astonishing rise in wealth for the nation's billionaires while tens of millions of Americans fell further behind," said Frank Clemente, executive director of Americans for Tax Fairness. "Billionaires are living in a different world from the rest of us."
Elon Musk, the founder of Tesla and SpaceX, boosted his net worth more than six-fold in the past year, rising to $162.1 billion. Amazon founder Jeff Bezos is the second richest American coming out of the pandemic with a net worth of $178.1 billion, up by more than $65 billion from a year ago, according to Forbes magazine.
Not all of the nation's richest individuals benefited financially during the pandemic. Among America's billionaires, Forbes magazine's wealth estimates indicate that nearly 9.6% suffered a drop in their net worth during the past 12 months. Among those was Life Care Centers of America Founder Forrest Preston, whose net worth dropped by $100 million as nursing homes and other senior facilities suffered during the pandemic.
But the increase in the combined wealth of the 15 richest billionaires jumped by 82%, or collectively by $563 billion, for the top 15 richest individuals.
"The pandemic profiteers are extracting windfalls of wealth during a time of widespread suffering for the majority of people," said Chuck Collins, director of the Institute for Policy Studies' Program on Inequality. "They exploit the artificial markets created by the pandemic, including having their Main Street competition shuttered and our increased dependence on online technologies."
The liberal groups that released the study on the growth of billionaires' wealth during the pandemic are pushing for higher taxes on the rich.
Under current tax law, the billionaires' wealth will not be taxed during their lifetimes, unless the underlying assets are sold at a gain. Thanks to lower federal estate tax rates - and the end of any estate or income tax in Tennessee this year - much of the wealth of America's billionaires will be passed onto the next generation.
"It's time we bring them down to Earth and make them pay their fair share of taxes like the rest of us so we can create an economy that works for everyone," Clemente said.
U.S. Sen. Elizabeth Warren, D-Massachusetts, and colleagues in the House have introduced the "Ultra-Millionaire Tax Act" to reap revenue from the fortunes America's wealthy. They are proposing a tax rate would be two cents on the dollar (2%) for people with wealth between $50 million and $1 billion and three cents on the dollar (a total of 3%) for wealth above $1 billion.
According to an ATF and IPS analysis of Forbes data, America's billionaires alone would owe $114 billion for past year if Warren's wealth tax had been in place and $1.4 trillion over 10 years. The law would raise a total of about $3 trillion over 10 years.
Biden also has proposed raising the tax rate on corporations and wealthy individuals.
Critics of such a change note that the top 1% of Americans who earned 16.5% of income paid 43.6% of federal income taxes received by the government in 2015. Meanwhile, more than 44% of Americans paid no federal income tax at all that year.
Meanwhile, most of the $1.9 trillion stimulus package signed into law this month by President Biden is designed to provide cash payments, utility and housing assistance, child tax credits, and a host of other relief measures to aid the general economy, not just the wealthy.
By taking money away from successful entrepreneurs and business owners by taxes, critics of Biden's tax hikes suggest such measures could weaken the economy and hurt both the job growth and philanthropy that aids low- and moderate- income Americans.
"We are not out of this pandemic-driven recession," U.S. Sen. Bill Hagerty, R-Tennessee, tweeted last week. "The last thing we need to do is raise taxes on hard working Americans!"
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.
How local billionaires fared in the pandemic
Forbes magazine calculates there are 657 billionaires in the United States and their combined net worth grew by 44.6% in the past 12 months during the pandemic. The billionaire list includes 13 Georgia residents and 11 Tennessee residents, but none from Alabama.*Jeff Lorberbaum, CEO of Mohawk Industries, returned to Forbes’ list of billionaires and was among 43 newly minted billionaires in the past year. Mohawk stock jumped 189.2% in the past 12 months, and Lorberbaum is now worth $1.9 billion.* Forrest Preston, the founder of the Cleveland, Tennessee-based Life Care Centers of America, saw his net worth fall by $100 million to $1.1 billion as nursing homes suffered during the pandemic.* Former Tennessee Gov. Bill Haslam, boosted his net worth by $300 million to $1.9 billion.* Gary Rollins, a University of Tennessee at Chattanooga graduate who gave UTC’s business college $40 million in 2018, boosted his net worth by $1.4 billion to $5 billion.* Ted Turner, a graduate of McCallie School who founded CNN, boosted his net worth by $200 million to $2.3 billion.* Thomas Frist Jr., former CEO of HCA Corp., and brother of former Senate Majority Leader Bill Frist, more than doubled his wealth from $7.5 billion to $15.9 billion.* Fred Smith, founder of FedEx, more than doubled his wealth from $2.7 billion to 5.8 billion.Source: Americans for Tax Fairness (ATF) and the Institute for Policy Studies (IPS) study based upon Forbes magazine estimates of wealth for each individual over the past 12 months from the start of the pandemic shutdown on March 18, 2020.