Economy

Billionaire on income inequality: Real wealth problem is too many people make too little

Key Points
  • The U.S. should be focusing its efforts on fixing "income insufficiency," rather than on a wealth tax, says Stephen Schwarzman.
  • Schwarzman points to insufficient education in the U.S. as contributing to people's stagnant wages.
  • The billionaire's comments come as the nation's wealthiest push back against wealth tax proposals from 2020 candidates.
VIDEO2:2802:28
Steve Schwarzman on Sen. Warren's private equity plan

Rather than implementing a wealth tax, the U.S. should be focusing its efforts on fixing "income insufficiency," said Stephen Schwarzman, the billionaire co-founder of investment powerhouse Blackstone.

"What we have now is a significant group of people who just aren't earning enough for a variety of reasons," Schwarzman told CNBC's "Closing Bell" on Monday.

"I think we've got a problem in our society, and part of that is what I call income insufficiency, rather than income inequality," he added. "There's always been income inequality in the United States."

In his reasoning, the Blackstone CEO said that insufficient education in the U.S. is contributing to people's stagnant wages. He added that the U.S. should modernize its curriculum and teach subjects such as computer science.

"If we don't change and modernize, we'll fall farther behind, and that disadvantages not the well educated, but the people who aren't as well educated," he said.

Schwarzman's comments come as the ultra-wealthy focus their attention on presidential hopeful Sen. Elizabeth Warren, D-Mass., whose campaign rhetoric and tax proposals have drawn the ire of many on Wall Street. Sen. Bernie Sanders, I-Vt., another 2020 contender, also has proposed a wealth tax.

"I don't think that would be successful in the United States," said Schwarzman, who led the now-disbanded Strategic and Policy Forum, which was a group of CEOs who advised President Donald Trump.

"There have only been 12 countries that have tried that, and of those 12 that tried it, only four are still trying it," he said of a wealth tax, referring to Spain, Switzerland, Norway and Belgium.

Warren's plan calls for a 2% tax on families' net worth of more than $50 million, which she has turned into a rallying cry for the rich to pitch in 2 cents for every dollar above that threshold.

Warren also wants to put a 6% tax on household net worth over $1 billion.

"You make it to the top, the top one-tenth of 1%, then pitch in 2 cents so every other kid in America has a chance to make it," Warren said at the fourth Democratic debate.

The wealth tax proposed by Sanders, a self-described democratic socialist, would be progressive, starting at 1% for household net worth of more than $32 million and ending at 8% on wealth over $10 billion. The Sanders campaign did not immediately respond to requests for comment.

A Warren spokesperson told CNBC, "Part of [the senator's] agenda is a small wealth tax paid by billionaires like Steve Schwarzman so we can provide universal child care and a pay raise for child care workers, invest real money to make every public school great, and cancel student loan debt and offer free college for anyone who wants it."

Warren is currently polling at No. 3, with 18.5% support, according to RealClearPolitics. Former Vice President Joe Biden is No. 1 with 29.8% support, and Sanders trails with 19.3%.

VIDEO10:0010:00
Watch CNBC's full interview with Blackstone CEO Steve Schwarzman