As panic grows and the backlash against the rich increases, this article considers how wealthy Americans need to act in the coronavirus crisis.
“Every society is three missed meals away from chaos”?
Vladimir Ilyich Ulyanov, aka Lenin
In light of the current crisis it might seem odd to quote someone who caused a lot of crises himself…or maybe it makes total sense…
In light of reports of runs on toilet paper, dry pasta and hand sanitizer, it is now starting to sink in to many Americans that they are about to face significant public health, economic and lifestyle changes as a result of the Coronavirus virus. It looks like the Ides of March will certainly bring a new and terrifying reality to the United States.
The reaction of the press to wealthy Amercans and the Coronavirus
Within a day of President Trump announcing a national emergency, multiple news outlets including Business Insider, Vanity Fair, The Guardian and even the New York Post published articles decrying how the rich are “selfishly” taking steps to protect themselves. The premise seems to be that those with more resources to act are somehow unworthy or downright evil. In reality these are folks just doing everything possible to protect themselves and their families. A quick glance at the comments section to these articles is illuminating. The obvious dog whistle of “The Rich are selfish and evil” had achieved its desired intention. There are repeated vicious calls to “tax them to death”. There is even the occasional alarming cry to “kill them for the benefit of the masses”.
The imbalance of the reporting
What didn’t get much coverage in the press was the fact that many wealthy people have jumped into action. Individuals like Jack Ma and Bill Gates are at the forefront of efforts such as diagnostic testing and vaccine development. This was weeks ahead of the US federal government joining such programs. This occurred because business-people recognize that ”strategic philanthropy” can be mobilized for an international crisis like coronavirus early, consistently, efficiently and effectively .
They recognize that every additional dollar they pay to the US government as taxes travels a long and windy road before it is deployed to deal with that same crisis…if at all. It is not a direct path for their tax dollar to be used for worthwhile objectives such as early childhood education or crisis preparedness planning. It must first survive being consumed by the non-discretionary mandatory portion of the US budget. Even if their tax dollar is somehow not applied to the 60% of the budget which is mandatory, it must still be allocated by legislation in competition with other existing discretionary budget priorities. So they, and many more like them, support strategic philanthropy.
The importance of self protection for wealthy Americans in the Coronavirus crisis
However, whether it’s through a desire to protect the ones that they love and/or to preserve their long-term ability to help others through their strategic philanthropy, America’s wealthy unfortunately still need to take action to protect themselves from the percolating populist blowback. This backlash may take many forms. There may be short-term looting (i.e. where locals believe that the rich must be hoarding essential items). The introduction of “Tax the Rich” policies may also be imminent. This might be rationalized both as “Getting money for good things” AND “Taking money from bad people”.
In this confusing reality, here are some practical actions that the wealthy should be immediately doing to protect themselves:
Action 1: Set up a safe physical location to ride out the Pandemic peak:
This “shelter” may be one’s existing home. It should contain sufficient necessities and enable social distancing to ride out the peak of the pandemic. Is the current home in a location which can easily be identified as a wealthy target? Does it make social distancing difficult? In these cases an alternative location might be prudent. (In our Case Studies read an example of how such a “safe location” protected a client and his family from the onslaught and aftermath of a major hurricane).
Action 2: Organize financial affairs to preserve the family wealth against changing tax legislation
Whether inspired by populist hatred of the wealthy or a desire for more government revenues to pay for disaster relief, it is more than a remote possibility that wealthy Americans will face enormous increases in their tax burden in the near future.
Few want a “free ride” and most recognize that some taxation is necessary. However, for many the new increases will be excessive. They will encroach on their ability to use their money for activities such as strategic philanthropy. It is often unknown whether a new piece of legislation is “unfair” until after its introduction. That is why prudence calls for proactively seeking advice now. We must start to “Play the Game Better” with its important backstop, the option to “Leave the Game” in place should better playing prove inadequate.
The importance of protecting wealth alongside your health
It is worth noting that while physically relocating to a secure and remote bunker in Kansas may serve to protect your family’s health, it will do absolutely nothing to protect your family wealth. Furthermore, organizing the playing and leaving strategies takes time to design and execute. But don’t let these factors dissuade you. The Coronavirus crisis will most likely flare up again in the fall. By this time the cost for dealing with the spring pandemic peak and additional future costs will become clear. So will the level of resentment of the average American voter toward those who were able to protect their families. Together these factors could easily fuel a Democratic sweep in November. This would result, at a minimum, in a doubling of the tax bills of wealthy Americans whose capital gains rates become taxed at ordinary income rates.
Wealthy Americans are currently focussing on relocating to a safe harbour. However, they also need to consider a second essential action. Namely, they should organize their financial affairs for the new reality.
Remember, the coming summer is only going to be a temporary respite from the long-term impact of the Coronavirus tsunami.