A wealth of cheapskates

Why do the super-rich hoard? Certainly not because they need money to spend. As economist Christopher Carroll of Johns Hopkins University points out in an upcoming paper, the super-rich save far more than they could ever spend, even with Dionysian indulgence. Gates' fortune must throw off, even by conservative estimations, about $6 million a day after taxes. You couldn't spend $6 million every day of your life even if you did nothing all day long but buy original art and waterfront real estate. The fortunes of Allen, Knight and others mentioned here throw off at least $1 million a day after taxes. Nobody can spend $1 million every day.

Carroll speculates that the super-rich won't give away money they know they will never use for two reasons: because they love money, and because extreme wealth confers power. We know already that people who give their lives over to loving money surrender their humanity in the process. As for clout, Carroll quotes Howard Hughes: "Money is the measuring rod of power." That $53 billion ensures Gates will be treated with awe wherever he goes. If he gave away 78% of his wealth like Carnegie did, he might be universally admired, but he would no longer be treated with the same degree of fawning reverence. He might even, someday, find himself in the same room with someone who has more money!

Runaway wealth accumulation by zillionaires, combined with the rising share of national income claimed by the top 1%, often inspires calls to soak the rich. But I disagree. Ideally, the top federal income tax rate and capital-gains tax rate should be increased a few percentage points while the payroll tax (which funds Social Security and Medicare) is reduced. Reasonable increases of taxes on the well-off -- if done to reduce taxes on the average -- would make the U.S. a fairer place.

But society ought to think twice before trying to legislate away extreme wealth entirely. The super-rich may be gluttonous, but bear in mind that the same economic machinery that brought them excess also brought broad benefits to the rest of society. The last two decades have seen a rising share of income at the top -- but they've also seen unprecedented prosperity for average Americans. Middle-class income is today the highest it has ever been. Living standards are too. Longevity, healthcare quality and education levels are all at historic highs.