America’s richest family dynasties had a lucrative pandemic year.
The top 10 richest saw their net worths grew by a median 25%, while family dynasties’ wealth grew at a rate 10 times greater than that of a typical family, according to a new report from the left-leaning Institute for Policy Studies (IPS).
The thing is many of these are true dynasties, with wealth dating back much further than relatively recent upstart billionaires like Mark Zuckerberg and Elon Musk. Thirteen of the top 20 wealthiest families were in the top 20 in 1983.
“Dynastically wealthy families remain wealthy for the long haul,” the report’s authors write. “The ranks of America’s dynastic fortunes have remained largely unchanged for decades, and are becoming increasingly persistent over time.”
The methods by which America’s wealthiest individuals hang onto their wealthy – without paying much in taxes -have become increasingly clear in the past few weeks. A bombshell ProPublica report showed just how little America’s billionaires paid in taxes proportional to their wealth; all of those methods are legal – and have been known by experts for years – but the exposure of the numbers themselves could kickstart tax reform.
Titled “Silver Spoon Oligarchs,” the report looks at at the top 50 dynastically wealthy families from Forbes’ inaugural ranking of America’s wealthiest clans, published in December 2020, as well as data from the Federal Reserve‘s Survey of Consumer Finance.
The IPS report breaks down the main ways family dynasties ensure their wealth lasts for so long, and here are three of the most notable ones.
(1) Fight against tax increases by pouring money into PACs and lobbying
The report notes that taxes on America’s wealthiest have sunk over the past few decades as wealth ballooned at the top. In fact, today’s wealthy Americans pay just one-sixth the rate of their 1953 counterparts.
Family dynasties may have held onto their own coffers through everything like funding lobbying efforts, donating money to candidates who are anti-tax, or even setting up their own corporate PACs.
“In-house PACs ensure that corporations are in an excellent position to influence public policy in ways that are favorable to them,” the report said.
(2) Give just the right amount to charity
There’s also an art to charitable giving, according to the IPS report: “Today’s family dynasties understand that if they want to remain at the top, they must not give too many of their assets to charity.”
The dynasties need to strike the right balance between giving and retaining their assets (presumably so they can continue to grow). For instance, the report notes that only four members from Forbes’ top 50 families have signed on to the Giving Pledge, where billionaires pledge to give away half of their wealth to charity either during their lifetimes or at death.
And, as Insider’s Mattathias Schwartz reported, some of the signatories of that pledge are moving slowly in disbursing that money. One mechanism that the wealthiest use for donations are donor-advised funds (DAFs); as Schwartz reported, philanthropists who utilize those funds can put assets in there, immediately see a tax write-off, and then actually disburse the funds in it whenever they want.
As the IPS report says, dynastic families funneling giving “through closely-held private family foundations provides them with not only an immediate tax deduction, but also the ability to maintain family control over those charitable assets into perpetuity.”
(3) Set up trusts and family offices
Dynastic families are increasingly setting up family offices to maintain and build their wealth, and shore it up for generations to come. According to the IPS report, about half of the nearly 10,000 family offices around the world were founded in the last 15 years.
Another mechanism the wealthiest use are dynasty trusts. Those are long-term trusts, as Insider’s Hillary Hoffower reported, and they have transfer taxes at their creation – essentially meaning they never incur estate or gift taxes when beneficiaries receive money from the trust.
“Because the super-wealthy are avoiding or reducing their taxes, they are shifting the obligations to pay for society’s investments onto lower and middle-income households,” the IPS authors write. “Dynasty trusts also entrench existing levels of wealth inequality and facilitate the formation of dynastic concentrations of hereditary wealth and power.”
America’s 10 wealthiest billionaire families saw their median wealth grow by 25%, per a new report from the left-leaning Institute for Policy Studies. Their net worth collectively increased by $136 billion since the pandemic began in March 2020.
Titled “Silver Spoon Oligarchs,” the report examines the growing concentration of wealth in the US by looking at the top 50 dynastically wealthy families from Forbes’ inaugural ranking of America’s wealthiest clans, published in December 2020, and data from the Federal Reserve‘s Survey of Consumer Finance.
Each family’s wealth comes from companies started by an earlier generation, whether a parent or distant ancestor, according to the report, and each represents a wealth dynasty passing generation to generation.
The ranks of these dynastic fortunes have remained largely unchanged for decades, per the report, and their wealth has grown exponentially during the pandemic.
The Lauder family, the cosmetics magnate behind the Estée Lauder empire, gained the most during the pandemic, nearly doubling its wealth with 83% growth. Even the family with the smallest wealth gains, SC Johnson, saw 9% growth – an increase of just over $1 billion.
“At a time when unemployment rates have skyrocketed and many American families have been struggling to get by, the very wealthiest families in the country have watched their assets multiply,” the report reads.
The pandemic exacerbated America’s wealth disparities
It’s the latest in the story of America’s K-shaped recovery. The pandemic widened wealth inequality in America, exposing preexisting disparities in wealth, in the sense that when the recovery began, upper middle class and wealthy Americans formed an upward leg of a K shape, while the rest saw their fortunes worsen.
But some billionaires have been thinking twice about how they’re tackling generational wealth. Bill Gates and Warren Buffett plan to give most of their money away through the Giving Pledge, instead of keeping it in the family.
Earlier this week, ProPublica published a stunning exclusive report documenting how billionaires like Elon Musk, Michael Bloomberg, and Jeff Bezos pay very little – sometimes even nothing – in income taxes.
Based on a cache of confidential IRS documents, the ProPublica report found that the nation’s 25 richest Americans “saw their worth rise a collective $401 billion from 2014 to 2018,” but in that same time they “paid a total of $13.6 billion in federal income taxes in those five years,” a total that “amounts to a true tax rate of only 3.4%.”
How raising taxes on the uber-rich would benefit the average American
If Elon Musk paid the same percentage in taxes as the average American, his day-to-day life wouldn’t change at all. He’d still be able to fly on his private jet to any of his homes whenever he chooses, terrestrial or otherwise. He’d vacation in the same spots, eat the same food, enjoy the same fame, and enjoy the same status that he enjoys right now.
But if all the Elon Musks who right now pay very little (or even nothing) in taxes were held to the same standards as average Americans, your life would improve in uncountable ways. The government could provide affordable childcare for every parent, allowing people more freedom to join the workforce. Our infrastructure could again be the envy of the world, rather than a slowly unfolding disaster movie. The social safety net would allow Americans the security to start small businesses, take bold career risks, and establish better lives for their children.
But greed is a hell of a drug, and many rich Americans fund anti-tax politicians and campaigns that ensure they pay as little as possible every April 15th. Only a few select “class traitors,” including Abigail Disney and Nick Hanauer, actively argue that rich Americans should be taxed more.
“I was born in 1961 in Tehran, Iran,” Shalchi said. When he was eight, Shalchi’s mother brought him and his four siblings to Europe in the hopes of a better life. Soon, he says, they settled “in one of the most beautiful places on this planet: Copenhagen, where we have what we call the welfare system.”
Shalchi’s mother told her children that in Denmark, “you can do whatever you want to do,” because of the free education, social support benefits, and health care provided by that welfare system. He took his mother at her word, studying to become a building engineer and starting his own real estate development business. “We really have the American dream in Scandinavia,” Shalchi laughed.
The reality of ‘self-made’ millionaires
While Shalchi acknowledges that he “worked hard” to build his company into a global leader, he admits to scoffing when he hears rich people describe themselves as “self-made.”
“Nobody is self-made,” Shalchi said. “Everybody is directed by society, their friends, and so on.” The Danish welfare system provides the security for smart people like Shalchi to become wealthy.
As a millionaire many times over, Shalchi has a very high tax bill. “I pay more than 50%” of his annual earnings to Denmark in an average year, he admits, and depending on how good a year he’s had, “I can go as high as something like 70%.”
But while wealthy Americans love to complain about taxes, Shalchi knows that he gets great value in return for what he pays. In Denmark, “I don’t see people sleeping in the streets like I see in many other countries,” he said. “We don’t leave anybody behind in Denmark. Everybody can make a pretty decent living. And we have security, which is extremely important for everybody.”
Why high-tax Scandinavian countries rank high in happiness
When people don’t have to worry about basic health care, education, or where their next meal is coming from, life changes from a zero-sum game to something to be enjoyed.
“That’s why we are always among the top 10 in the world when happiness reports come out every year,” Shalchi said. High-tax Scandinavian countries are always competing with each other to top the UN’s annual Happiness Report, while America tends to stagnate in the mid-to-high teens.
So what kind of tax structure would we need to build a happier, more equitable America?
“If we raised taxes on all income to 45%, reinstated some reasonable corporate tax rates, and closed all the international loopholes,” Hanauer estimated, in conjunction with better wages and protections for ordinary workers, 90% of the worst problems that have plagued America over the last 40 years “would melt away.”
“By reinstating some corporate taxes and reinstating some taxes on wealthy people, you could absolutely pay for, for instance, the American Family Plan that the Biden administration is proposing,” Hanauer said. That would combat poverty, drastically reduce childcare costs, and make community college free for all.
Rather than spending ridiculous sums of money to be sheltered from extreme poverty, crime, and public health failures, the wealthiest Americans could simply pay the same in taxes as the average American family. Doing so, Hanauer says, would “improve the lived experience for every American,” including the ultra-rich.
When a celebrity or a billionaire sits down for the first time with Manhattan’s most infamous divorce attorney, the conversation gets deep. Quickly.
Robert Stephan Cohen always asks the potential new client about sex – namely, whether they’re still having it – as well as how they made their money and why their marriage is failing. He’s brutally honest about his thoughts, and it’s not unusual for the conversation to end with Cohen talking the person out of a divorce entirely.
“I find that if people are still able to be happily married and be intimate, I think there’s something to save,” Cohen said.
Yet in person, Cohen is warm and thoughtful. In a recent interview with Insider from his offices on the 32nd floor of a midtown Manhattan skyscraper, the 82-year-old attorney frequently cracked jokes and asked questions of his own.
It’s a high-stakes moment for Cohen: He’s representing Melinda Gates in her split from Microsoft founder Bill Gates. Their divorce settlement could very well become the largest in history.
Bill Gates is currently the fourth-richest person in the world and worth an estimated $126 billion, according to Forbes. It’s unclear whether the couple has a prenuptial agreement – Cohen declined to comment on the Gates’ divorce specifically – but the divorce petition asked that their assets be divided in accordance with a separation contract, the details of which remain a mystery.
Cohen spoke with Insider broadly about the complexities of a billionaire’s divorce, and how America’s elite divide their astronomical wealth when their marriages crumble.
“The wealth that exists in the United States is staggering. Even to me,” Cohen said. “Remember: For the person who doesn’t have the money, it’s likely to be the largest business deal that they’ll ever do in their life.”
Code names and 2 a.m. phone calls
Cohen said each of his cases involving a high-net-worth client starts off the same way: with an initial meeting.
Many of the issues at stake for a billionaire or movie star are the same ones facing the average American couple – infidelity, conflict, and money troubles. Cohen said he’ll spend about 90 minutes in each intake meeting delving into “the psychology of how to deal with the divorce.”
Cohen has to ask his wealthy clients whether there are children involved, whether custody disputes will arise, how the client made their money, when they started to make their money, and why their marriage broke down.
“Divorce lawyers are like doctors in a weird way,” the comedian Chris Rock told Insider. Cohen represented Rock in 2016, during his highly-publicized divorce from his wife of 19 years.
“They need to have a good bedside manner. And Bob has a very good, soothing manner. Gets you through, lets you see the big picture,” Rock said. “He explains the realities of the situation.”
When a client decides to retain him, Cohen said that’s when he and his team dig in for the long haul. They start pulling in financial statements and reviewing the details of their client’s assets. He’s cultivated a bevy of experts in securities, real estate, and banking to help with his biggest cases over the years. His firm, Cohen Clair Lans Greifer Thorpe & Rottenstreich LLP, has three lawyers on staff who are also certified public accountants and often help his team with complex tax or securities laws.
“In the olden days, we dealt with spreadsheets and accountants and it took months sometimes to put together a financial statement for a wealthy client,” he said. Today, it can be as simple as making a single phone call or having an elite client “press a button” and deliver him a relatively accurate financial statement.
With celebrities like Rock, Cohen has to strategize around the client’s privacy protections.
“We have more code names for our clients in this firm than probably a lot of other firms who do these things, because we have to generally hide and keep secret the fact that we’re representing somebody before it becomes public,” he said.
Cohen said as soon as he receives a call from a celebrity, he comes up with a code word – a previous client was “watermelon” – to be used only by him and the other lawyers working on the case. The rest of his firm, and even his wife, usually won’t know what the code word stands for.
The attorney-client relationship is also remarkably close, Cohen said, no matter how famous the client is, or how many managers or assistants try to intervene. All clients get his personal cellphone number, with the caveat that they use it responsibly.
Cohen said a celebrity client once phoned him in the middle of the night, exclaiming, “Bob, I need to talk to you.”
When Cohen noted that it was 2 a.m., she responded, “Well, it’s only 11 o’clock in LA.”
‘He’s not a shark’
Celebrity divorce attorneys are a small and exclusive bunch. Many of Cohen’s toughest adversaries are also his friends – and despite frequently facing off with him in the courtroom, they sing his praises outside of it.
To succeed in divorce cases where millions of dollars are at stake, attorneys like Cohen have to know so much more than alimony laws, according to David Saxe, a retired New York Supreme Court justice.
“To be a good lawyer in that context, you have to know a lot more than what the divorce law says,” Saxe told Insider. “You have to understand corporate law, you have to understand estate law, you have to understand tax law, partnership law, commercial law.”
“You have to be a thoroughly well-rounded business lawyer to represent those clients properly in a divorce, and that’s what Bob Cohen does,” he continued. “That’s his specialty.”
Saxe, who as a justice frequently oversaw divorces where Cohen represented one of the parties, said Cohen was “a gentleman to his adversaries” despite his formidable reputation. He never had to admonish Cohen in court, nor did he ever catch Cohen trying to take advantage of another lawyer.
“They used to call matrimonial lawyers ‘sharks,'” Saxe said. “He’s not a shark. He always kept on the high road, and I think that won him the plaudits of the other judges … as well as his colleagues.”
Rock said Cohen was a calm, bracing presence during a miserable period in his life. The comedian has since been candid over his faults and infidelities during his marriage, and his famously bitter divorce involved rumored disputes over child custody.
“I had some issues,” Rock acknowledged. “It’s like, when you’re a guy, some people don’t even think you want to see your kids. He was very understanding about all of that.”
Rock said one piece of wisdom from Cohen helped him through the worst of a two-year legal battle: The harshest disagreements make up only a tiny percentage of what’s at stake in a divorce.
“Put it this way. People get divorced. People fight. Things take sometimes years. At the end of the day, you’re only talking 4%, one way or the other,” Rock said. “[Cohen] said that to me. I was like, ‘Oh, okay.’ And that put it in perspective.”
“No one – not in America, anyway – gets killed in a divorce. You know what I mean?” Rock continued. “There’s no lawyer that ever got somebody so much more than they were supposed to get, or so much less. It just doesn’t exist in this country.”
From Coney Island to midtown Manhattan
Cohen was raised in Coney Island, Brooklyn, the son of a taxi driver father and a homemaker mother.
Initially keen on dentistry at Alfred University in western New York, Cohen took a course on constitutional law in his junior year, became hooked, and decided to become a lawyer instead.
Cohen learned about ambition and wealth relatively early in his career, under the wing of Roy Cohn, the notoriously ruthless prosecutor and right-hand man of Sen. Joseph McCarthy.
“I will say that my politics were quite different than his,” Cohen said. “But he was regarded as a brilliant lawyer. Other issues surround him, but he was nevertheless a brilliant lawyer.”
Beyond his legal prowess, Cohn taught Cohen about the finer things in life, taking him on rides in private airplanes and showing him office suites on Park Avenue.
“I got to see things that I never saw, and I got a taste for it,” Cohen said. “Ambition is very much part of not only a successful lawyer, but being successful at anything you want to do. You’ve got to want to achieve the highest level that you can.”
Though Cohen started out as a corporate lawyer, his name became inextricably linked with divorce law when he represented the billionaire private equity giant Henry Kravis in a post-matrimonial case in the 1990s.
“It was not a divorce case, but it sort of smelled a little like a divorce case,” Cohen said. “My name was in the newspaper attached to this lawsuit that I had won; we got the case dismissed and everybody started calling me. They thought I was some matrimonial lawyer.”
He took on a few matrimonial cases, then “got good and kept getting better,” he said. Eventually, word-of-mouth recommendations among the Hollywood and Wall Street elite led him to develop a lucrative matrimonial boutique firm and a renowned teaching career. His “Anatomy of a Divorce” class at the University of Pennsylvania Law School has been popular among students for years, according to Eleanor Barrett, the school’s associate dean.
The types of divorces that Cohen specializes in are known as “business divorces,” Saxe said. They involve absurdly wealthy clients – often hedge fund managers, corporate moguls, or real estate developers – who come with sprawling assets in all manner of hiding places.
Whether a divorce lawyer is representing the moneyed or less-moneyed spouse, they have to be savvy enough to understand how to approach that level of wealth, Saxe said.
“The divorce comes right in the middle of this financial empire, and Bob would have to navigate that,” he said.
“Those people could probably retain any lawyer in the world,” Saxe said. “They want somebody who is highly professional, that is discreet … and who will listen carefully and give good advice. And he can do all of those things.”
Fewer Americans are getting divorced – and fewer are getting married
The twilight years of Cohen’s career have arrived as both marriage and divorce rates plummet in the United States.
Census data shows divorce rates have steeply decreased in the last decade. At the same time, experts say younger generations are marrying later in life (or, increasingly, not at all), and waiting until after they reach major milestones like graduating, establishing their careers, or buying homes.
Cohen said he was aware of the trends, but isn’t losing sleep over it.
“I’m not worrying about it, nor does anybody in my firm,” he said. “Look, marriage is an institution and it’s never going to go away. There’s a constitutional right in our country to be married. There are Supreme Court of the United States cases dealing with the right to marriage. I have a bunch of kids; all of them are married.”
Cohen said his team handles roughly 50 prenups per year, as well as a number of postnuptial agreements. He also confirmed that the so-called gray divorce trend the Gates’ divorce has highlighted is one he sees in his practice, so there’s plenty of business for him.
Cohen’s clients, much like himself, are working longer and living longer. In some cases, they’re divorcing later.
“When you were 60 in the olden days, you stopped working, you were retired, you were on a pension. Maybe if you were lucky, you got a small place in a warm climate,” he said. “It’s way different now – at 60, you’re vital, you’re working, and your career is ahead of you, not behind you.”
Even when a divorce case he’s working on turns nasty, Cohen said he sleeps very well at night.
“There’s the bad part, the destruction of a marriage. But the other side of this is we start people out and we give them a new life,” he said. “It sort of makes what I do a lot nicer sometimes – when I smile and think about the gift that we give to people.”
Wealth no longer means what it used to for high-net-worth millennials.
The pandemic has caused the wealthy to alter their lifestyles and reassess their priorities, changing how they perceive wealth in the process, a new report by Boston Private found. The report, titled the Why of Wealth, surveyed high net-worth individuals with at least $1 million of assets.
Millennials, who turn ages 25 to 40 this year, changed their perceptions of wealth the most. More than three-quarters (89%) said the pandemic altered the way they define wealth. The generation was also most likely to say the pandemic shifted their wealth priorities and their emotions about wealth, with 85% of respondents feeling this way about each change.
Both Gen X and Gen Z felt fairly similarly, with at least three-quarters of each cohort identifying in the same way for nearly all these sentiments. However, it’s a sharp contrast from baby boomers and the silent generation. Less than a quarter (24%) of both generations combined said the pandemic changed their perception of wealth. The report attributes this to their age, as they’ve already experienced significant cultural milestones and being more settled into a certain mindset.
More millennials (as well as Gen X) associate wealth with success and happiness, whereas boomers and the silent generation are more likely to view wealth as peace of mind and independence. “For these younger generations, wealth is a key contributor to creating a comfortable, happy life, and is directly related to achieving important goals, having a good family life and being a positive contributor to community and society,” the report reads.
Older generations feel less able to use their wealth on enjoying life as much as they’d like to right now, according to the report, whereas younger generations are possibly using their wealth to enjoy life more than they feel they should.
What’s more is that this shift in perception of wealth has also affected millennials’ wealth goals – 78% said the pandemic changed how they planned to use their wealth in the future, compared to 26% of baby boomers and the silent generation.
A New York family’s investment of about $8,000 in Shiba Inu coin, a dogecoin spin-off, netted them a $9 million fortune in the space of a few months, CNN Business reported.
The token gained attention last week as a crypto billionaire donated $1 billion of Shiba Inu coin to help with India’s COVID-19 relief.
The coin’s value has grown by about 10,000% this year, according to Coinbase. It dipped about 34% after the Indian donation from Ethereum creator Vitalik Buterin was announced.
The New York family, which asked CNN Business to not use their surname, began investing with a few hundred dollars in February. They continued buying into the coin until they had about $8,000 invested, the report said.
By Thursday, the family’s investment was worth “nearly $9 million” CNN Business reported, saying it had reviewed the family’s crypto records.
It was a dramatic turnaround in fortunes for the brothers, who live in Westchester county and whose wedding business was nearly destroyed as a result of the COVID-19 pandemic.
Shiba Inu coin calls itself the “Dogecoin Killer,” as they share the same symbol: the Shiba Inu breed.
The token was listed on India’s WazirX crypto exchange last week.
The couple announced the news in a statement posted to Twitter on Monday, saying that while they plan to continue working together at the Bill & Melinda Gates Foundation, they no longer believe they can continue growing as a couple.
Gates, who cofounded Microsoft with Paul Allen in 1975, is worth $130.5 billion, according to Forbes. He’s one of only eight moguls worth over $100 billion and is currently the fourth-richest person in the world.
In fact, the couple previously said it’s unfair they’re so rich. Instead of spending billions on themselves, they often donate it to charity through the Bill & Melinda Gates Foundation. They’ve also pledged to give away most of their fortune through the Giving Pledge, which they launched in 2010.
Keep reading for a look at how Gates spends his billions.
Taylor Nicole Rogers contributed to an earlier version of this story.
Bill Gates, the cofounder of Microsoft, has an estimated net worth of $130.5 billion.
Devices worth $150,000 can display different paintings or photographs on the screens at a single touch. However, there are real paintings on the wall as well – like the Winslow Homer painting Gates purchased for $36 million in 1988.
Outside of his Washington pad, Gates also has a 4.5-acre vacation ranch in Wellington, Florida, with a 12,864-square-foot mansion. He reportedly dropped $27 million to buy a whole string of properties in the area. The area is hotspot for wealthy equestrians.
He reportedly owns nearly half of the Four Season Holdings’ hotel chain through Cascade, including hotels in Atlanta and Houston. Gates shares 95% ownership with Prince Alwaleed bin Talal of Saudi Arabia.
Gates previously invested in Amyris, a synthetic-biology company that originally produced precursors to malaria drugs and hydrocarbon-based biofuel. Today, it focuses on health through fragrances, skincare, and sweetener.
Gates and Melinda have been huge on philanthropy. They were recently named the most generous philanthropists in the US by The Chronicle of Philanthropy, having donated more than $36 billion to charitable causes through the Bill & Melinda Gates Foundation.
The Gateses have spent money traveling for their charity work. They donated more than $2 billion in 2016 to causes related to global health and development and US education. In 2017, they donated $4.78 billion, mostly to projects run by the Gates Foundation.
They’ve pledged about $2 billion to defeat malaria, donated more than $50 million to fight Ebola, and pledged $38 million to a Japanese pharmaceutical company working to create a low-cost polio vaccine.
The new European Super League (ESL) came crashing down recently after nine football clubs pulled out of the plans following huge backlash from fans, politicians, and players.
The 12 teams that were about to join the elite breakaway league would have been handed between 100 million to 350 million euros ($120 million to $420 million), the Financial Times first reported.
The ESL was also planning to receive $4.2 billion in debt financing from JPMorgan over a 23-year period, before the US investment bank said it “misjudged” the deal after the majority of the teams withdrew from the league within 48 hours.
Now, a fan-led review into English football will take place to assess clubs’ finance, ownership, and supporter involvement in the game.
But it begs the question: where does all this money come from in the world of football? Overall, there are three main sources of revenue: broadcasting, commercial, and matchday revenue.
TV broadcasting revenue
TV deals are one of the most important sources of income for football clubs. which can be sold domestically and internationally. Leagues, such as the highly popular English Premier League, own the television distribution rights of all their games.
TV channels bid for the rights to air the matches and the football leagues sells them to the highest bidder. For the Premier League, this happens every third season and is typically Sky Sports, BT Sports, and most recently, Amazon Prime.
Robert Wilson, football finance expert and lecturer at Sheffield Hallam University, told Insider that broadcast revenue typically makes up around 70% of the income of most Premier League clubs.
Although each club gets an equal share of the deal from the Premier League, they also receive merit payments – if they’re shown on TV more, they get paid more.
Wilson said that last year, Liverpool, who won the Premier League, earned around £150 million ($208 million) from the domestic TV rights deal, while Norwich City, who came last, earned around £110 million ($153 million). Relegation is therefore a costly and daunting prospects for clubs near the bottom of the league.
The rights to show Premier League matches between 2019 and 2022 were sold for nearly £4.5 billion ($6.2 billion) in 2018, with Sky Sports getting hold of the majority of the games. This was a drop from £5.1 billion ($70 billion) in the 2016-2019 seasons.
Reportssuggest that when broadcasters bid for 2022-2025 TV rights this summer, they won’t be prepared to spend as much as they did in previous years. Since BT Sports and Sky Sports agreed to a content-sharing deal in 2017, competition dropped between TV channels for the need to bid big, The Guardian reported in January.
“They were trying to produce – in my view – more football and the market was probably saturated,” Wilson said.
Another big money pot for football clubs is commercial revenue – in other words, income from sponsorship and merchandising, ranging from shirt sales, license holders, and retail outlets.
Big brands, such as Adidas, pay license fees to football clubs to stick the club’s logo on their shirts. As an example, Wilson said Adidas pays Liverpool a flat fee of £75 million ($10.4 million) to license the production of their replica jerseys.
“It doesn’t matter if they sell one shirt or a hundred million shirts, they still get £75 million,” Wilson said.
He also said the shirt sponsor, which is stuck on the front of the football shirt, is also a source of commercial revenue, as well as shirt-sleeve sponsors. Some of this revenue goes into the other parts of the club, such as the women’s club, he added.
The merchandising aspect of commercial revenue was hit hard during the COVID-19 pandemic because of the closure of shops, Dr. Nicolas Scelles, senior lecturer in sports management at Manchester Metropolitan University, told Insider.
“They can still sell online, but of course it affects the commerical revenue,” he said.
The final major source of income for clubs is the money they earn on the day of a match. This includes matchday sponsorship, the sponsor on the ball, and most importantly, tickets sales.
The expensive corporate boxes, which business people use to entertain clients in, contributes to the total income, as well as food and drink sales.
It’s important to note that matchday revenue varies depending on the size of the club stadium – a bigger stadium with more fans, such as Arsenal’s Emirates stadium, will generate more revenue on a match day.
Scelles said this type of revenue has been affected the most by COVID-19 considering that stadiums were forced to close for the majority of 2020.
Transfer fees can also be income, Scelles said, as well as club owners’ injecting in their own money, but these two factors aren’t consistent sources of revenue that keep every football club up and running.
So why do clubs end up drowning in debt?
Player transfer fees and players’ salaries are the two main things that football clubs spend their money on, and they’re not cheap, especially when there’s no cap on how much players earn.
The most expensive transfer fee so far was Neymar da Silva Santos Júnior who transferred from Barcelona FC to Paris Saint Germain (PSG) for £200 million ($277 million) in 2017.
Wilson said it’s not uncommon for a number of clubs to spend more than they earn, and many have 140% of expenditure to turnover. The expenditure usually gets underwritten by future revenues, he added.
“Because the TV deals and the sponsorship arrangements are multi-year, they’ve got some guaranteed future revenue. But then they tend to accrue large debts and that’s why we see frequent instances of ownership change,” Wilson said.
Ownership transition can happen when a club ends up in millions of dollars of debt and a new owner takes over from the previous one to inject more money into the club. But this starts the cycle all over again, Wilson said.
The piles of debt stem from the huge competition between the teams. They’re all fighting to win the most trophies, nab the best players and be the best in the league. As a result, they hike up players’ salaries and transfer fees.
This “winner takes all scenario” sets benchmarks for other clubs, Wilson said. For example, Neymar being transferred for £200 million lifted the entire ceiling for how much transfer fees should cost, he said.
Wilson believes football’s financial system isn’t sustainable. “These losses are almost accepted as part and parcel of the financial model,” he said. “There’s loopholes and grey areas,” he said.
The only reason why there’s a review into the finances after the European Super League is because the clubs involved are some of the biggest in the world and the logistics of the league sparked uproar from loyal fans, Wilson said.
From a business perspective, Scelles doesn’t think clubs being in debt is a bad thing as the money is being used to generate more revenue, develop the club, and extend it internationally. But he said there needs to better financial management in place, even though this is hard to regulate in football.
Under President Joe Biden’s proposed tax increases, the top 1% of Americans could soon see their tax bills grow by about $100,000 per year.
A new report from the Institute on Taxation and Economic Policy (ITEP) finds that only the highest-earning Americans would see their taxes change if President Biden’s proposed increases to the income tax rate and capital gains rate pass. That change is concentrated amongst the top 1%, defined as those with an income over $681,600 (their average income is $2,167,700). The bottom 99% of taxpayers would see a 0% tax change, it said.
On average, the highest earners would see an increase of $104,130 in taxes, coming in at around 4.8% of their income. For those making between $276,200 to $681,600 – an average income of $404,100 – the average tax increase would be $20 a year.
Some states will be hit harder than others by tax increases
In a few states, a larger share of the population would feel the impact of proposed tax hikes. The report highlights that in five states – and the District of Columbia – a more than 1% share of the population would feel a hit.
Those are New Jersey, Massachusetts, Connecticut, California, and New York. In Massachusetts and New Jersey, 1.2% of the population would be affected by tax hikes. The wealthiest New York City residents will soon have the highest tax rate in the country regardless, per Insider’s Hillary Hoffower.
Biden’s proposals target the wealthy, but they’re not final
Beyond increases, the IRS could also get about $80 billion in funding to ramp up enforcement on the wealthiest taxpayers, as Biden is proposing. A recent study by IRS researchers and academics found that the top 1% of Americans may be hiding billions from the IRS; Biden’s increased IRS funding could raise $700 billion over a decade, which would still leave the wealthy hiding hundreds of billions.
Of course, the package still has a long way to go before becoming law. A Morgan Stanley research note looked at Biden’s proposals versus what they predict as possible, and said the corporate tax rate and rate on capital gains will ultimately come in lower. However, the income tax rate increase and IRS enforcement will likely be as Biden proposes.
“Look, I’m not out to punish anyone. But I will not add to the tax burden of the middle class of this country,” Biden said in a Wednesday speech to the joint session of Congress.
He added: “When you hear someone say that they don’t want to raise taxes on the wealthiest 1% and on corporate America – ask them: whose taxes are you going to raise instead, and whose are you going to cut?”
A congressional battle line was forming last week over former President Donald Trump’s SALT tax cap, which is threatening to derail President Joe Biden’s $2 trillion infrastructure proposal.
A bipartisan group of more than two dozen lawmakers, calling itself the SALT Caucus, formed to push for Trump’s cap on tax deductions be reversed. They sought to include it as part of Biden’s plan to stimulate the nation’s economy.
“This issue is so critical to our state and our constituents that we will reserve the right to oppose any tax legislation that does not include a full repeal of the SALT limitation,” the newly formed group said in a letter.
The caucus could cause problems for Biden as he prepares to push a massive spending bill through a deeply divided Congress. Democrats hold a slim majority in the House, adding greater weight to each vote against his plan.
For Biden to eliminate the cap as part of his spending plan, there would have to be “a discussion about how that would be paid for, what would be taken out instead,” Jen Psaki, White House press secretary, said Thursday.
She added: “As you also know – just with our little calculators out – it is not a revenue raiser, and so it would add costs – and potentially significantly – to a package.”
Progressive Rep. Alexandria Ocasio-Cortez seemed to be at odds with the caucus last week.
“I don’t think we should be holding the infrastructure package hostage for a 100% repeal of SALT,” Ocasio-Cortez, of New York, told a pool reporter.
SALT, which is part of Trump’s 2017 tax cut, placed a $10,000 cap on federal deductions for state and local tax. The caucus said the cap resulted in increased tax bills in New York, California, and other high-tax states.
Eliminating the cap would likely lower taxes for the wealthy, who could claim higher deductions on their federal returns. But it could also raise the cost of Biden’s plan, making it more difficult for House Speaker Nancy Pelosi to usher the plan through the House.
New Jersey’s Rep. Josh Gottheimer, a member of the new caucus, also spoke out. He said it “it is high time that Congress reinstates the State and Local Tax deduction, so we can get more dollars back into the pockets of so many struggling families – especially as we recover from the pandemic.”