Singer to Washington: Stop overtaxing the rich--we earned it!

By Lawrence Delevingne

Wed Jan 30, 2013


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"Our nation is not a rigid, class-bound aristocracy. It is an upwardly-mobile republic--if we can keep it."


   
   Paul Singer (Photo: Bloomberg)
Billionaire Paul Singer railed against President Obama and Democrats' efforts to increase taxes on the rich, arguing that most wealthy Americans succeeded on their own initiative and not because of a privileged upbringing.

"Advocates for higher taxes instead insinuate that wealth in America is a rigged game, and that redistributive taxation is necessary to level the playing field. But empirical reality is not kind to that claim," Singer said in $21.1 billion Elliott Management Corporation's yearend letter to investors this week.

To bolster the point, Elliott analyzed the backgrounds of people on the Forbes 400, a list of the wealthiest Americans. "Contrary to the rhetoric we hear from Washington, the results of our study suggest that America remains an upwardly mobile nation where anyone can turn ingenuity into success," Elliott wrote. "In 2012, self-starters made up 64% of the Forbes 400, while those who inherited their wealth made up 29.3%. Fewer than 7% of those on the list came from beginnings we deemed to be 'advantaged,'" the letter said.

Examples noted by Elliott include hardware mogul John Menard, "who built post-frame buildings in college to finance his own education," and healthcare entrepreneur Patrick Soon-Shiong, "who grew up a second-class citizen under South Africa's apartheid regime."

"Taken by themselves, these observations are only suggestive, not determinative. But what they suggest is that upward mobility is alive and well in the United States, and in some ways getting stronger--and that the wealthy in America, far from being a fixed class, is a group that remain open to newcomers from all backgrounds, provided that they have access to some form of higher education," the letter said.

Singer comes from humble roots himself. As a 2012 Fortune profile of Singer noted, he grew up one of three children of a pharmacist and a homemaker in Tenafly, New Jersey. He majored in psychology at the University of Rochester before going to Harvard Law School. Singer then became an attorney in the real estate division of the investment bank Donaldson Lufkin & Jenrette but left after three years to launch Elliott Associates in 1977.

A political conservative, Singer supported Mitt Romney's presidential bid, which advocated for lower taxes on the wealthy as a counterpoint to Barack Obama's agenda. The hedge fund manager is number 392 on the Forbes list with an estimated net worth of $1.1 billion as of September 2012.

Singer's policy alternative to higher taxes is education. "All this indicates that upward mobility in America would be improved if policymakers spent less time calling for redistributive taxation and more time devising education reforms that actually work. Improving upward mobility is a worthy goal, but a myopic focus on inequality as such can be a destructive distraction," the letter said.

"Redistributive measures designed to transfer resources from the top quintile to the bottom do nothing to improve mobility, and can actually hinder it. Punitive taxation can harm incentives for striving and risk-taking, while income transfers can create dependency traps that keep people stuck at the bottom. Our look at the Forbes 400 provides a timely reminder that our nation is not a rigid, class-bound aristocracy. It is an upwardly-mobile republic--if we can keep it."

A spokesman for Elliott declined to comment.

See also: Paul Singer issues dire warning on loose monetary policy, slams Obama | Goldman Sachs, SkyBridge among Mitt Romney's hedge fund bundlers | Paul Singer strikes back, says size is no enemy of performance