Proud to pay, and yet they don't

This story in The Guardian caught my attention this week:

More than 250 billionaires and millionaires are demanding that the political elite meeting for the World Economic Forum in Davos introduce wealth taxes to help pay for better public services around the world.

“Our request is simple: we ask you to tax us, the very richest in society,” the wealthy people said in an open letter to world leaders. “This will not fundamentally alter our standard of living, nor deprive our children, nor harm our nations’ economic growth. But it will turn extreme and unproductive private wealth into an investment for our common democratic future.”

The rich signatories from 17 countries include Disney heir Abigail Disney; Brian Cox who played fictional billionaire Logan Roy in Succession; actor and screenwriter Simon Pegg; and Valerie Rockefeller, an heir to the US dynasty.

“We are also the people who benefit most from the status quo,” they said in a letter titled Proud to Pay, which they will attempt to deliver to world leaders gathered in Davos in Switzerland on Wednesday. “But inequality has reached a tipping point, and its cost to our economic, societal and ecological stability risk is severe – and growing every day. In short, we need action now.”

A new poll of the super-rich shows that 74% support higher taxes on wealth to help address the cost of living crisis and improve public services.

I'm confused. If these billionaires (let's call them the 'willing wealthy') want to give more of their wealth to the government, there is literally nothing stopping them from doing that right now. Governments don't need to do anything. The willing wealthy who are 'proud to pay' can each cut a cheque right now. It gets even better for the willing wealthy though. Since they are not legally obligated to make this extra payment, they can even choose which government to pay it to. 

So, what is stopping the willing wealthy from making extra payments to the government? I can offer you two cynical explanations for this behaviour.

First, if the willing wealthy give up some of their wealth through taxes, rather than donating it to the government, then they get to maintain their current status relative to other wealthy people. If everyone is made a bit poorer, at the same rate, then the willing wealthy's ranking among wealthy people remains unchanged. Moreover, they will still be much richer than the average person, so they get to keep their wealthy-person lifestyle. [*] Nothing much really changes for them. However, if the willing wealthy give up some of their wealth through donations to the government, they will lose status relative to the wealthy people who don't give up anything. [**]

Second, offering to give up some of your wealth is a great way to virtue signal: Look at all these selfless wealthy people, willing to make a great sacrifice. Why won't governments listen to them?

The willing wealthy know that governments aren't going to call their bluff. Governments are unlikely to implement a wealth tax, or raise the top marginal income tax rate. The willing wealthy are a minority among wealthy taxpayers and political donors. Governments aren't going to piss off their donors. But the willing wealthy can get a lot of good media coverage of their willingness to sacrifice their wealth. What better way to take a target off your back, than to move it from the wealthy (who are willing to be taxed) to the government (who are unwilling to tax them)?

To all this, I say: Put your money where your mouth is, Abigail Disney. Cut a cheque to the IRS today. If you really want the government to have more of your wealth, then give it to them. Put up, or shut up.

*****

[*] Also, if every wealthy person has a bit less wealth, then the demand for luxury goods and services that the wealthy buy will decrease by a little, decreasing the price of those goods and services. it becomes a little bit less expensive at the margin to maintain the wealthy-person lifestyle. I don't think this is much of a motivating factor though.

[**] Note that this is different from donations to other worthy causes. Philanthropy can increase status, but I don't think anyone (wealthy or otherwise) is going to characterise making donations to the government as philanthropy.