Biden has now basically secured the democratic nomination, which has me thinking about the end of all the other campaigns. Michael Bloomberg didn’t quite, as his ads promised, “get it done.” His campaign, which started with a flash, ended up a mere flash in the pan. After some disappointing losses, Bloomberg dropped out of the U.S. presidential race, which suggests that money alone can’t buy votes, at least on a grand scale. As was widely circulated, Bloomberg tried to “get it done” by spending unprecedented amounts of his own money on his campaign. By my rough calculation, Bloomberg’s campaign cost him about $260 million, after tax.
Why is my value a mere fraction of the $570 million commonly cited as the amount Bloomberg laid out in his pursuit of the Democratic nomination? Simple. Depending on what tax planning Bloomberg has done (and many other details we’ll brush aside here), Bloomberg’s wealth when he dies will be subject to the federal estate tax, currently levied at a maximum of 40 percent. And, as a New York resident, he will also be subject to a 16 percent state-levied estate tax. That means that for every dollar Bloomberg spends on anything, whether it is trying to influence voters, working to solve the problems of gun violence or climate change, or simply on “wine, women, and song,” that’s roughly 50 cents (16 cents on the state level and 34 cents on the federal level), that he (or rather, his estate) will not pay when he moves on to the big trading floor in the sky (I am, of course, ignoring some of the finer points of estate taxation).
So far, I have discussed only existing taxes—the analysis gets sweeter if you consider adding proposed taxes. If Bloomberg’s democratic opponent, Bernie Sanders, had prevailed in the race and became president, and his tax on extreme wealth became law, a portion of Bloomberg’s extreme wealth would also face an 8 percent annual tax. Even if a Sander’s presidency were to have killed Bloomberg, and he died right after the election (right after filing his first wealth tax return), he would still have got out of paying an 8 percent wealth tax on the $570 million spent on his presidential run. Having spent that money, no extreme wealth tax is owed on it, and so even less would show up on the estate tax chopping block. As a result, Bloomberg’s $570 million campaign really would only cost, after tax, about $260 million.
Is there a broader message in Bloomberg’s relatively cheap presidential bid? Yes – estate and wealth taxes both encourage spending. Rather than encourage savings and investment, they turn every dollar spent by the wealthy subject to such taxes (or more accurately, the estates of the wealthy) into a tool for reducing their tax liability – in Bloomberg’s case, a potential reduction of almost half the amount as one might think. So, it should not surprise us to see wealthy individuals spending crazy amounts of money to try to buy political offices. For them, after taxes, such expenditures are always “half price.”
