A local billionaire sparked a national uproar with a letter to the editor complaining about persecution. He explains. Excerpted from Inforum’s “The War on the 1%,” February 13, 2014.

TOM PERKINS, Co-founder, Kleiner Perkins Caufield & Byers

In conversation with

ADAM LASHINSKY, Senior Editor at Large, Fortune

 

ADAM LASHINSKY: Tom, I want to start at the very top, which is to ask you what the catalyst was to writing this short letter to The Wall Street Journal?

TOM PERKINS: The frustration had been building up for a long time about what I see as the demonization of the rich, but it was a particularly nasty attack on my ex-wife, which triggered my response. So I thought, being a Norwegian knight, I should ride to her defense and I spilled a little bit more blood than I planned, but I’m not sorry I did it.

LASHINSKY: I should point out that your ex-wife, Danielle Steel, is in the front row of the auditorium this evening. She came to hear you speak, but you refer to an attack on her. Explain. Whose attack was it? What was the attack?

PERKINS: I don’t want to spend a lot of time on this.

LASHINSKY: Nor do I.

PERKINS: Over the years, the San Francisco Chronicle has had a series of attacks on her. I won’t go into all of them, but there have been a lot of them. Among the attacks is [that while] she [gets] New York Times number one best seller, usually, on every book  – [so] obviously her books are being read in San Francisco – they’re never reported in the Chronicle, ever. So anyway, that is what started it all.

LASHINSKY: So you decided to write a letter. You were angry about an attack in the San Francisco Chronicle, so you wanted to write about income inequality. Tell everybody briefly what you said in the letter and what your goal was.

PERKINS: It turned out to be the most widely read letter in the history of The Wall Street Journal, which, of course, is surprising. And it’s because I used a forbidden word. I used the word, “Kristallnacht,” which shouldn’t be used ever, I suppose. You shouldn’t compare anything to the Holocaust, for example, because it’s incomparable and the same with Kristallnacht.

Anyway, I said, “Is there a progressive war on the One Percent that could be like the Kristallnacht?” And that got everybody’s attention. I made the point that in Germany, where 1 percent of the population was Jewish, and a mad, fiendish dictator used incredible political skills to focus hatred on that 1 percent and used it as a stepping stone to power. I saw a parallel between our One Percent here in America and that 1 percent. So that’s the parallel I drew.

LASHINSKY: Now you subsequently apologized for having used the Nazi reference. You quickly followed that up by saying you’re not apologizing for suggesting that victimizing a small minority is a bad idea, period, and that was your point. Correct?

PERKINS: That was my point. I just would like to start with this word for a minute. The Wall Street Journal, on February 4, ran a rather long op-ed piece by a professor at Harvard – Ruth Wisse. She’s a professor of Yiddish and comparative languages, andhas written [about] Nazis and the Holocaust. The headline is, “The Dark Side of the War on the One Percent.”

 

Two phenomena: anti-Semitism and the American class conflict. Is there any connection between them? In a letter to [The Wall Street Journal], the noted venture capitalist Tom Perkins called attention to certain parallels as he saw them between Nazi Germany’s war against the Jews and Americans progressives’ war on the “one percent.” For comparing two such historically disparate societies, Mr. Perkins was promptly and heatedly denounced. But is there something to be said for his comparison of the politics at work in the two situations? … “Are you unemployed? The Jews have your jobs. Is your family mired in poverty? The Rothschilds have your money.” … The parallel that Tom Perkins drew in his letter was especially irksome to his respondents on the left, many of whom are supporters of President Obama’s sallies against Wall Street and the “one percent”…. The ranks of those harping on “unfairly” high earners  … are playing with fire. Anyone seeking to understand the inner workings of such a campaign will find much food for thought in Mr. Perkins’s parallel.

 

LASHINSKY: Our overall goal is to explore the subject of inequality and why inequality is such a hot button issue. But, on the subject of her academic point, you must see the difference between on the one hand a 1 percent – a small minority that was essentially powerless being persecuted by a majority – and on the other hand, a small minority that is extremely powerful, that has all the resources of modern society and wealth, being persecuted, I’ll grant you, by a majority, namely the other 99 percent. Though the group you’re actually referring to is, at various times, several hundred protestors who are angry.

PERKINS: No. I think the parallel holds. The typical German had never met a Jew, but some of the Jews were extremely wealthy and they owned the large department stores and so forth. They were very prominent and I think it’s a very good parallel. I think it holds.

LASHINSKY: You’re saying that the average Occupy Wall Street protestor has never met a rich person or somebody who rides a Google bus. Is that your point?

PERKINS: Probably, I think so.

LASHINSKY: You’ve chosen to speak for the One Percent. Not only do you have the courage of your convictions, but you have them repeatedly. This isn’t the first time you’ve stepped up to defend yourself. But the One Percent has certain advantages and ways of defending itself that an ethnic group that is being persecuted, that is small, does not.

PERKINS: I think I’ve sort of answered that already. I think that if Germany had ever had American gun laws, there would have never been a Hitler. Now that’s controversial.

LASHINSKY: If Nazi Germany had America’s gun laws, making guns widely available to the public, then the Jews would be able to defend themselves. Interesting.

PERKINS: Yes. So there.

LASHINSKY: We will agree that we won’t illuminate your thinking anymore on the comparison of the rich One Percent with the Jews in Nazi Germany.

PERKINS: What I ‘d like to talk about [is] the nature of the persecution of the One Percent here in America right now. I’d like to start with some facts, which are always useful.

LASHINSKY: They may or may not be useful, but go ahead.

PERKINS: We’ll see. First of all, I don’t think anybody has any idea what the One Percent is actually contributing to America. Let me just get into that very quickly.

Before I do that, let me talk a little bit about the persecution of the rich, and I’d like to take the Koch brothers. There are three of them. I know one of them, Bill, who has nothing to do with the other two that are highly political. But they’re all big contributors to charities and so forth. David Koch was on the board of New York Presbyterian Hospital and the hospital was going bankrupt, so David gave $100 million to the hospital. That was interpreted as Koch buying the hospital for the purposes of firing the nurses and destroying the nurses’ union. So there was a big rally and all kinds of important people showed up. The nurses said, The Koch brothers have a plantation mentality, anti-union to the core. Harry Belafonte called them white supremacists. Then Letitia James, who is head of the union, said that right-wing, anti-union profiteers like David Koch should not be meddling with health care in New York City. All have to stand together against the Koch brothers coming to New York City.

So let’s just start with simple arithmetic. Let’s say you’re a successful author and your income is taxed at a little over 50 percent, if you live in California. On your death, there will be another roughly 50 percent tax. So, out of the dollar you originally made, you kept 25 percent, 25 cents. So you gave 75 percent of your lifetime’s worth in the form of taxes, not including property and other taxes. That’s on an individual basis.

I just learned something today that I suspect nobody in the audience is familiar with. If you’re making more than $250,000 as a family and you sell your home and there’s a capital gain on the home – let’s say you sell it, you want to buy a retirement home or something – Obamacare has added a 3.8 percent tax on your gain. How many of you knew that? Oh, quite a few. All right, I didn’t know.

Finally, I want to get to the actual statistics. I’ll make this brief. I got this from the Tax Foundation. These are facts. The top 1 percent of taxpayers pays a greater share of the income tax burden than the bottom 90 percent combined, which totals more than 120 million taxpayers. In 2010, the top 1 percent of taxpayers, which totals roughly 1.4 million taxpayers, paid about 37 percent of all income taxes. This is a big jump from 1985 when the top 1 percent paid a quarter of all income taxes. Indeed, the income tax burden on the bottom 90 percent has dropped and the bottom 50 percent pays only 2.4 percent of total taxes. The top 10 percent of taxpayers pays 70.6 percent.

LASHINSKY: Let’s be clear about what we’re talking about. The argument is that there is a war against the rich and that the rich are being persecuted. We’re not having a conversation about whether or not the rich are doing enough. Is this the persecution that you’re referring to?

PERKINS: Of course. I think that taxation – I wouldn’t say it’s a form of persecution, but the extreme progressivity of the tax rate is a form of persecution.

LASHINSKY: But the extreme progressivity is, first of all, not new.

PERKINS: It’s getting worse.

LASHINSKY: But first it got “better,” to use your terminology, and now it’s getting “worse,” to use your terminology, but it’s not unprecedented. The republic thrived and withstood high taxes before and likely will again. I’m trying to put this in the scope of history to ask you: Where is the persecution in that?

PERKINS: I think, if you’ve paid 75 percent of your life’s earnings to the government, you’ve been persecuted. Let’s just sum it up that way. Meanwhile, let’s get back to the 99 percent for a minute and talk about them. They are not doing very well. They’re doing extremely badly. In 1985, the average family making $250,000 a year paid 40 percent income tax. Today, they pay 47 percent income tax and about half of that increase is Obamacare. So nobody is having a wonderful time with taxes.

LASHINSKY: It’s an interesting point. I think part of the reason people came to hear this conversation is that the 99 percent are hurting, to make a generalization. There is income inequality. You are agreeing with that.

PERKINS: I am totally agreeing with that.

LASHINSKY: So the question is what to do about it. First of all, there is a perception in the country, in San Francisco specifically, that the people who are making this great wealth essentially don’t give a damn.

PERKINS: I give a damn and I’m concerned about what’s happening to the non-One Percent. But San Francisco doesn’t like the experience of becoming a suburb of Silicon Valley and that’s what’s happening.

LASHINSKY: Explain. I feel like San Francisco, relatively speaking, especially in the technology community, is thriving as a center of job creation, of wealth creation.

PERKINS: That isn’t what I said.

LASHINSKY: But how is it becoming a suburb?

PERKINS: Because the people in Silicon Valley are living in San Francisco more and more. This is a trend that will continue. And why not? It’s a great city – has wonderful restaurants, great culture, a beautiful bay and everything, but the economic effect of that has been to drive up rents about 30 percent.

What to do about that? I don’t think there’s much you can do about that. That’s inevitable. As Silicon Valley thrives, which it is [doing], more and more people will want to live in San Francisco. So then we have the phenomenon of Google buses. I just find it almost incomprehensible to get angry about Google buses; if they want buses, it’s fine with me. But to break the windows in them and  rough people up, I think, is preposterous. So now we have Google boats. Are they going to be out there shooting at the boats?

LASHINSKY: I certainly don’t mind stating my opinion that boorish behavior is boorish behavior and everyone should say that breaking windows of buses is a bad idea.

Number one: Should the city specifically be reimbursed handsomely for the use of its facilities, namely the bus stops? Number two: If we encourage companies like Google and their employees to opt out of the public transit system, is it only going to make the public transit system [worse], and again do we care? Do you care about a good public transit system?

PERKINS: Is there a question in there somewhere?

LASHINSKY: Yes. Do you have an opinion on the use of city resources and do you agree with the philosophical point that, for example, public transit, public infrastructure, is a good thing?

PERKINS: Of course it is, and it’s available for everybody. And Google is paying a fee for the bus stops.

LASHINSKY: Belatedly.

PERKINS: But they’re paying it. Now, is Google responsible for the rising rents in San Francisco? Indirectly, yes. What can they do about it? Nothing.

LASHINSKY: In your opinion, does the government generally spend too much?

PERKINS: Yes. It spends more than it takes in. It takes in $3 trillion a year in taxes and it spends closer to $4 trillion.

LASHINSKY: You’re against higher taxes; other people are for higher taxes. Presumably we could raise taxes to pay for these things, which gets me back to the question of, do we spend too much?

PERKINS: Well, we do spend too much. There are so many examples. But taxes will rise. Now you know there’s been discussion by Nancy Pelosi, our congresswoman, of a wealth tax. It would be 2 percent per year on your wealth. And somebody said, “Well, OK, let’s say you’re retired and your wealth is in your house and it’s worth $1 million dollars. That’s no problem. The government will just take a 2 percent mortgage per year and that’s how we’ll get the money.” She’s also talked about a value added tax and much higher taxes on the wealthy. The beast will be fed and taxes will go up. I don’t know which – or perhaps all of these things will happen. The irony is if you took 100 percent of the One Percent’s income and wealth – we’re only talking about 1,400,000 people – that total would run the government for about a month.

LASHINSKY: What is your 60-second idea to change the world?

PERKINS: I’ve been thinking about this as I was listening to you ramble on, and I’ve got it. It’s going to make you more angry than my letter to The Wall Street Journal.

LASHINSKY: I highly doubt it, but let’s hear it.

PERKINS: Thomas Jefferson, at the beginning of this country, thought that to vote, you had to be a landowner. Now that didn’t last very long and the vote was given to everyone. But the basic idea was, you had to be a taxpayer or a person of property to vote. That went by the boards. Margaret Thatcher tried to change that in England, in what became called a poll tax. The idea was that every single citizen of the UK had to pay something in taxes, even if they got it back in subsidies elsewhere. If you didn’t pay something in taxes, you couldn’t vote. She was thrown under the bus by her own party for trying to push that through. So the Tom Perkins system is: You don’t get to vote unless you pay a dollar of taxes. But what I really think is, it should be like a corporation. If you pay a million dollars in taxes, you should get a million votes. How’s that?

LASHINSKY: You’re right that I don’t agree with you. You’re wrong that I’m angry.

I would point out to you the flaw in your argument is that since everybody pays sales tax and anyone who drives a car pays taxes for that, we’re right back to where we started in the wonderful place we’ve evolved since Thomas Jefferson with everybody having the vote.