Bond king Bill Gross: I got rich at the expense of labor and now I feel guilty

Gross believes there are lessons to be learned by both corporate America and America as a whole.

By MSN Money Partner Oct 31, 2013 1:25PM

File photo of Bill Gross, co-chief investment officer of Pacific Investment Management Co., on Nov. 17, 2011 (© Andrew Harrer/Bloomberg via Getty Images)BusinessInsiderBy Sam Ro, Business Insider

 

Bill Gross' latest monthly PIMCO Investment Outlook is out, and it spends some time discussing the massive wealth disparity in America.

 

"Having gotten rich at the expense of labor, the guilt sets in and I begin to feel sorry for the less well-off," he writes.

 

Gross calls for the wealthiest Americans to support higher taxes rather than be "Scrooge McDucks."

 

From his note:

 

Having benefited enormously via the leveraging of capital since the beginning of my career and having shared a decreasing percentage of my income thanks to Presidents Reagan and Bush 43 via lower government taxes, I now find my intellectual leanings shifting to the plight of labor. I often tell my wife Sue it’s probably a Kennedy-esque type of phenomenon. Having gotten rich at the expense of labor, the guilt sets in and I begin to feel sorry for the less well-off, writing very public Investment Outlooks that "dis" the success that provided me the soapbox in the first place.

 

If your immediate reaction is to nod up and down, then give yourself some points in this intellectual tête-à-tête. Still, I would ask the Scrooge McDucks of the world who so vehemently criticize what they consider to be counterproductive, even crippling taxation of the wealthy in the midst of historically high corporate profits and personal income, to consider this: Instead of approaching the tax reform argument from the standpoint of what an enormous percentage of the overall income taxes the top 1 percent pay, consider how much of the national income you’ve been privileged to make.

 

In the United States, the share of total pre-tax income accruing to the top 1 percent has more than doubled from 10 percent in the 1970s to 20 percent today. Admit that you, and I and others in the magnificent "1 percent" grew up in a gilded age of credit, where those who borrowed money or charged fees on expanding financial assets had a much better chance of making it to the big tent than those who used their hands for a living.

 

Yes I know many of you money people worked hard as did I, and you survived and prospered where others did not. A fair economic system should always allow for an opportunity to succeed. Congratulations. Smoke that cigar, enjoy that Chateau Lafite 1989. But (mostly you guys) acknowledge your good fortune at having been born in the '40s, '50s or '60s, entering the male-dominated workforce 25 years later, and having had the privilege of riding a credit wave and a credit boom for the past three decades. You did not, as President Obama averred, "build that," you did not create that wave. You rode it. And now it’s time to kick out and share some of your good fortune by paying higher taxes or reforming them to favor economic growth and labor, as opposed to corporate profits and individual gazillions. You’ll still be able to attend those charity galas and demonstrate your benevolence and philanthropic character to your admiring public. You’ll just have to write a little bit smaller check. Scrooge McDuck would complain but then he’s swimming in it, and can afford to duck paddle to a shallower end for a while.

 

If you’re in the privileged 1 percent, you should be paddling right alongside and willing to support higher taxes on carried interest, and certainly capital gains readjusted to existing marginal income tax rates. Stanley Druckenmiller and Warren Buffett have recently advocated similar proposals ...

 

"The era of taxing 'capital' at lower rates than 'labor' should end," he said.

 

Last week, Gross made headlines for calling out corporate raider Carl Icahn on a similar matter. Icahn has called for Apple to initiate a massive share repurchase plane. "Icahn should leave Apple alone & spend more time like Bill Gates," tweeted Gross. "If Icahn's so smart, use it to help people not yourself."

 

Interestingly, Gross attacks the wealth creation that has come from share repurchases of late. And he believes there are lessons to be learned by both corporate America and America as a whole.

 

"Profits ... increased because the company cut expenses along the way," wrote Gross. "Earnings per share (EPS) did even better, because X used some of its cash flow to buy back stock instead of reinvesting much of it in new plant and equipment.

 

"The simple answer is that long-term growth for each company, and for all countries, depends not on balance sheet alchemy and financial wizardry, but investment and the ultimate demand for a company or a country’s 'products,'" he said.

 

Read Gross's whole note at PIMCO.com.

 

More from Business Insider:

 

* Bloomberg Businessweek Captures The HealthCare.gov Failure In One Brutal Cover

* Citi: This Is What Will Happen To The World In The Next 4 Years

* The 9 Best Steakhouses In America

134Comments
Oct 31, 2013 2:10PM
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Mr. Gross just earned himself a new fan.

A rich man with a conscience. A rare sight in today's world.

If only there were more of your type.

Oct 31, 2013 3:48PM
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I think the magic words are "why should capital gains be taxed at a lower rate than labor".

Folks, I am about as conservative monetarily and politically as they come.  I hate high tax rates. And, I think our federal government is screwing nearly all of us.   But, I come from a middle class working background where 45 hours a week of sweat put food on the table and a roof over our head.  When he says something like the above, it makes sense to me.  Why should the bricklayer or the carpenter or the bus driver potentially have higher effective tax rates than the person earning the majority of his income from investments?  To me, that's not right, moral or fair.  They should be treated the same as far as I'm concerned.

Why can't the frickin politicians understand this?  We have extreme positions on the left and the right.  The left want punitive higher rates on investment capital.  The right want lower rates than ordinary income taxes on investment capital.  This proposal seems middle of the road to me.  ALL earnings, regardless of the source are treated the same.  No exceptions.  No waivers.  No special interest favors.  Everyone is treated equally and equitably by the tax code.  I'm all for it.


Oct 31, 2013 3:34PM
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You first, Mr. Gross. Give till it hurts.

 

As a NOT rich American who has saved, been careful, and done without, I do not begrudge those who took greater risks than I and were rewarded with better investment returns and higher incomes. Imposing higher tax rates on higher salaries is exactly the kind of disincentive that MUST be avoided.

 

There will ALWAYS be rich people. There will ALWAYS be poor people. Some people are driven to risk, to work, to succeed far beyond the average person. Then there are the average "Joes" who want to make enough to pay the bills and save a little but NOT kill themselves or risk the farm doing it. Then there are those with their hands out who complain and bitch how unfair life is. It is the human condition, and no amount of social engineering and educational indoctrination will change it---despite the "best" efforts of Progressive do-gooders and meddlers who think they know what's best for all of us.

Oct 31, 2013 3:25PM
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I'll give him the benefit of the doubt...but his "solution" is all wrong.  The rich paying higher taxes will not help those in the middle class.  It will only help to grow government.  A better idea would be to argue for lower taxes for ALL Americans and then cut his pay by 90% and give all of his employees a big raise.  That is what would truly help the people who helped to make him so wealthy.
Oct 31, 2013 3:50PM
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Carl Icahn is literally destroying long term Shareholder value. He's a Pump and Dump artist only looking out for himself. Borrowing money to do Massive stock buybacks is just plain foolish in light of the current and future economic Outlook. Carl creates nothing, he's a parasite.
Oct 31, 2013 3:01PM
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GREED is so rampant in the world. From the posts here, there are plenty of greedy slimes to go around!   They feel that the country owes them and they are more than willing to take all they can get. Anyone who is not on easy street like them are plain old slackers and not deserving of a chance to make a decent living. There are PLENTY of hard working men and women who have to pay these rich shysters taxes because the politicians are bought and paid for by big business and they enact laws enabling the wealthy to evade paying anything. Big business has never had it so good with borrowing money with no interest. 
Oct 31, 2013 3:36PM
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Did you notice he didn't say he should be paid less so his employees should be paid more. He said i should pay more taxes. Incredibly inefficient. Take less pay both in cash and stock based comp and pay your rank and file employees more not vice presidents.  But that hurts stockholders.
Oct 31, 2013 2:31PM
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There is a difference between voluntarily giving and being shaken down at the point of a gun (aka: taxed).  There was nothing in any government policy that prevented him from giving more.  It is time for Mr. Gross to take individual and personal responsibility for his guilt issues, instead of making broad pronouncements regarding what others should be doing.
Oct 31, 2013 2:27PM
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Don't you just love when hypocrites like Gross and Buffett play like Mother Teresa, while at the same time are very quietly employing all manner of income sheltering schemes?

 

They are trying to sound more "socialist" thinking it mirrors current popular politics.

Yet the follow through, if any, usually translates into the middle getting squeezed even harder.

 

Why don't these humanitarians cough up the funds to fix the current IT healthcare fiasco?

Now that would be putting your money where your mouth is.

Oct 31, 2013 4:00PM
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Mr Gross - Feel free to write a check to the US Treasury.  I am certain they need the money!

Oct 31, 2013 4:49PM
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He should give it to charities. The government will just waste it to get votes.
Oct 31, 2013 4:56PM
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Speaking from his billionare perch and maybe has 10 years left or so he can afford to say "lets pay more taxes I'm filthy rich and my family is set for life"  Hooray for me now I have a conscious.  F**k You Gross.  What you don't see is those on fixed income whom are forced to put their retirement money at risk and need to invest because safe investments with insurance pay next to nothing and one of the major positives is lower capital gains tax.  Us poor retirees need to take the risks to make money to live.  Don't play the hero now laughing all the way to financial freedom in the hope of becoming Saint Gross.  Capital Gains tax is the same for all.  Now if you support no capital gains tax for anyone who earns less than 300k that makes it some what fair.  Also no income tax on Social Security for the disabled and retired earning less than 300k great.  Small businesses under 50 employees should pay a flat rate of 10%. 

Oct 31, 2013 1:49PM
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Well Bill, if you feel so guilty, I do believe there is an address in DC where you can send your money to besides with the IRS when you file your tax return.  And also plenty of good charities out there more than willing to put your money to work.  But speak for yourself.

 

As for me, I worked hard for what I have and paid plenty in taxes along the way.  And I plan on enjoying the fruits of my labor.  And I don't feel one bit guilty, because I earned it the old fashioned way, I got a good education and worked hard.

 

I often chuckle when I think of Bill Gates and Warren Buffet lamenting about how the rich should pay more taxes.  And this is from two very, very wealthy individuals who do everything in their power to pay as little in taxes as they possibly can.  Gates and Buffett because of their uber immense wealth have complete control and flexibility and have structured their financial affairs to specifically minimize federal and state income and estate taxes by taking full advantage of every provision of the tax code they can. 

 

And they are so happy with how the federal government spends money, they specifically will make sure the feds receive virtually nothing when they die.  So how is that for those two speaking out of both sides of their mouth?

Oct 31, 2013 4:32PM
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Here the deal.  There needs to be major cuts and significant tax increases if the Government is going to continue doing mostly everything it is now doing!  The public needs to decide how big of a government it wants. 

If there are big cuts then I don't think there would be as much reluctance to pay more taxes, but they cannot just spend more and more and charge more and more taxes.

Oct 31, 2013 2:50PM
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In the song the Coalminers Daughter, the singer sings of her father working hard to earn a "poor man's dollar." There is a difference. Many do very little or no work for the dollars they get, while others struggle to earn that poor man's dollar. Then they spend those unearned dollars into the system and dilute the value of earned dollars. I'd like to see the playing field leveled up so everyone actually must do real work to get their money. The system as it is... is a scam. He should feel guilty.
Oct 31, 2013 5:20PM
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So giving it to the government is good? You say you ripped off labor so you give it to a group that takes 40% for themselves. Where is the logic here. This is political crap. Try giving it to labor you fool. Make more jobs build a hospital anything but continuing the road to government control. Government is not an entity of benevolence. it is rulers and I am sick of people running my life.
Oct 31, 2013 2:35PM
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respectable,, makes me feel a lot better they feel guilty,, I just wished it make my back feel better, I'd toss my cane an get a good night sleep

Oct 31, 2013 5:30PM
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News flash the Rich profit off others work. News flash welfare collectors and the rich suffer from the same problem living off your work.
Oct 31, 2013 3:13PM
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I don't buy this... " and having shared a decreasing percentage of my income thanks to Presidents Reagan and Bush 43 via lower government taxes'. How much of his income did he donate to charity? There are different ways to 'share' ones income besides taxes.

Oct 31, 2013 2:57PM
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one thing about it most of the real workers aint sitting in some cubical reading this to agree or disagree with,, they're actully out working,,,aint got time
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