It’s a line you don’t hear every day from Wall Street titans: Maybe we really should pay higher taxes.
The pandemic has bold-face names like Larry Fink and Lloyd Blankfein thinking out loud that it might be necessary as the coronavirus pandemic derails the economy. A few are even calling for the wealthy to pay up.
Finance billionaires benefited more than just about anyone from President Donald Trump’s massive tax cuts, his signature legislative achievement. Now they’re contemplating the end of that era, underscoring the gravity of the moment.
Just this week, Ray Dalio, the man behind the largest hedge fund, told JPMorgan Chase & Co.’s private-banking clients to expect higher tax rates no matter who wins November’s race for the White House. The mounting fiscal pain across the nation is making the math undeniable to leaders like Fink, who runs the world’s biggest asset manager as chief of BlackRock Inc., and Blankfein, who led Goldman Sachs Group Inc. through the last financial crisis.
“Taxes have to go up — and it will go up at the upper end,” Leon Cooperman, the outspoken hedge fund veteran, said in an interview. “We have to deal with our fiscal situation and stop indebting our children.” He has said he would be willing to pay half of his income to the government.
No one expects Trump to immediately reverse the tax cuts he signed into law when the economy was booming, particularly with his re-election at stake. In fact, even as millions of jobs vanish, the president has talked about cutting payroll taxes and reducing the capital gains rate, another move that would disproportionately benefit the affluent.
But inside executive suites, the debate has already shifted from whether to raise tax rates to a question of how much they’ll go up when the economy starts to recover.
Almost $3 trillion of emergency federal rescue funding has yet to stop the pain from a deadly outbreak that ground entire industries to a halt and forced more than 33 million Americans to seek unemployment benefits. The fallout has left state and local governments’ finances in
Fink predicted this week that the corporate rate could rise by a third next year. Blankfein said the clear need to raise more revenue means corporate taxes will have to go up. His question is how far rates can rise before it becomes counterproductive.
“Raising taxes too much will hamper the recovery, and, particularly for high-tax states, incentivize individuals and companies to leave,” Blankfein said in an email.
His longtime lieutenant, Gary Cohn, was the face of Wall Street’s support for the tax overhaul as he helped guide it after leaving Goldman Sachs to join Trump’s White House. The law slashed corporate rates to 21 percent from 35 percent. That has since helped the nation’s biggest banks churn out record profits and given a boost to rich Americans despite Trump’s promise that they “will not be gaining at all.” Cohn declined to comment.
Critics of the tax cuts have long complained that companies spent the extra cash buying back their own shares to boost stock prices, rather than plowing the money into developing their businesses and adding jobs. Even Trump has complained about how the money was put to work.
Some wealthy Americans who are anticipating higher taxes are in a position to
Not everyone on Wall Street would be happy with paying more. One top executive at a global asset-management firm said he was so disturbed by a plan floating around Albany to boost taxes on the richest New Yorkers that he called an influential state senator to complain.
Dalio, the founder of Bridgewater Associates LP, predicted in 2017 that the Trump tax cuts would only provide a “short-term minor boost” to the economy. Now he thinks they will have to be rolled back to help pay for the response to the pandemic. His statements this week were described by a person who heard the remarks. A spokesman for Bridgewater declined to comment.
Cooperman, the hedge fund manager, has feuded with Senator Elizabeth Warren over her plans to introduce a wealth tax on billionaires, even getting choked up on television as he discussed the debate on the fairness of her proposal. He says he’s in favor of the rich shouldering a bigger burden — but only to a point.
A proposal from Representative Alexandria Ocasio-Cortez of New York to tax the richest Americans at 70 percent “makes no sense,” he said. “It becomes a question of morality.”
— With assistance from Katherine Burton and Heather Perlberg
