Bloomberg Businessweek - USA (2019-05-27)

insidetherooms.Heradioedbacktosaythatthefamilywas

stuckinside—thedoorhadjammed.Wallachandtheguard

triedpushingandpullingtheancientdoorfreefromitssticky

hinges.It refusedtobudge.Aspanicsetin,Wallachcalled

downtohotelsecurity.Severalmenarrivedwithhatchets,

whichtheyusedtobreakdownthejammeddoor,afterwhich

thetraumatizedfamilyrushedoutinrelief.

Wallachtooktheshakenguestsdownstairsfortea.“We’re

inthePalmCourt,andthere’sa violinistplayingViennese

waltzes,andI startedtotalktothem,apologizingprofusely,”

Wallachtoldme.“Iknowwhat’scoming,soI’mlisteningto

theStrausswaltzes,andI said,‘I couldstarttocryrightnow.’”

Wallachheldbacktearsashewatchedhisdreamofsellingthe

PlazatotheKwoksevaporate.AfterhelefttheKwoks,Wallach

dejectedlywalkedthefewblockstoTrumpTowertorelaythe

badnews.

“[Trump]wasverycalmatfirst.‘Adoorjammed?Whatdo

youmeana doorjammed?’” recalledWallach.Then,“Itwas

asif a tsunamiandanearthquakehadhitatthesametime.

Therewereloudshrieksfromthe26thfloor.‘Adoorjammed?

A doorjammed?’”

TrumpranovertothePlaza,“andhestartedfiringpeo-

ple:‘You’refired!You’refired!You’refired!’Heevenfired

peoplewhodidn’tworkatthehotel,whowereguests,”

Wallachrecounted.

AsWallachandthePlaza’screditorscompetedtoidentifya

buyerforthehotel,rumorsofdealsperiodicallysurfaced.The

NewYorkPost, forinstance,claimedthatthewealthySultan

ofBruneiwaspurchasingthehotel.Trump,maintainingthe

appearancethathe,notthecreditors,wasincontrolofthe

hotel,insistedthestorywasfalseandthatthePlazawasn’tfor

sale.Then,beforeWallachcouldlineupa newPlazabuyer,

Citibankbeathimtothefinishline.Thebankfoundnotjust

onecrediblecandidatewithdeeppockets,buttwo.

By1994,it wastwoyearsintothePlaza’sbankruptcy,

andCitibankhadbegundiscussionswithKwekLengBeng,

a billionairepropertydeveloperfromSingapore.Kwekhad

recentlyboughttwohotelsinManhattan,theMillennium

Hotellocated downtown,and theHotelMacklowe, in

Midtown. “One of my principal bankers at Citibank

approachedmeandaskedmetolookatthePlaza,”Kwek

toldme.Thehotelwaswell-locatedandhistoricand“had

thepotentialofgeneratinglargeprofits.”

As KwekwasconductingduediligenceonthePlaza,

Citibankcalledhimagain.Thistimeit wastotellhimthat

PrinceAlwaleedbinTalalofSaudiArabia,a fellowbillion-

airewhoalsohappenedtobethebank’slargestprivateshare-

holder,wasalsointerestedinpurchasingtheproperty.“I

[got]a calltosaythatPrinceAlwaleedwouldliketoforma

jointventurewithmeonthePlaza,”saidKwek.Soon,the

twobillionaireswerepartnered.ThejointforceofKwekand

Alwaleedwasa devastatingblowforWallach.Onebillionaire

wasbadenough,buttwooftheworld’srichestmen,combin-

ingtheirvastresources,wouldhavenoneedofTrump.Yet,

ratherthanadmitdefeat,Wallachdecidedhestillhadone

moremovetomake.

HisfirststepwastoadviseTrumptoingratiatehimself

withKwek.“IsaidtoDonald,I thinkit wouldbebeneficial

foryoutomeethimandseeif a dealcouldbecraftedwhere

you’rehispartner,” saidWallach.“Youmanagethehotel,and

yourpositiondoesn’treallychangeexceptyougota partner,

butnobodyeverlistenstowhothepartneris.Alltheyhearis

Trump.”Trumpagreed,andsoonWallachandhisbosswere

ontheConcordetoLondon,wheretheSingaporean’shotel

chainwasbased.

“WhenMr.KwekarrivedatLondon’sLanesboroughHotel

tomeetMr.Trump,theNewYorkerfinishedsigninganauto-

graphformodelElleMacpherson,”theWallStreetJournal

recounted,“andthenpromptlyproposedthatMr.Kwektake

himasa partner,ratherthantheprince.”Kwekdeclinedthe

offer,possiblybecauseTrump’sempirewasintattersandhe

hadalreadybankruptedthePlaza.Trump,undeterred,then

askedwhetherKwekwouldallowhimtocontinuemanaging

thehotel.“Sorry,Mr.Kwekresponded:Thatjobwasgoingto

theprince’shotelcompany.”

When the meeting with Kwek ended in rejection,

Wallachturnedtootherschemes,namelymakinghimself

a nuisance. As thetalks between Kwek andAlwaleed

progressed,executivesfrombothcompaniesconverged

inNewYorktodiscussthejointventure.“Theyallcometo

NewYork,allthehigher-upsontheSaudisideandallthe

higher-upsontheKwekside,andwheredotheydecide

tostay?InthePlazahotel,whichisstillownedandrun

byDonaldTrump,”Wallachtoldme.Itmadehis jobof

gettinginthewaythatmucheasier.“They’resostupid,

they’restayinginhispropertyandtheydon’thavea clue.”

TheexecutivesmetinthePlaza’sVanderbiltsuite,sitting

May 27, 2019

Rethinking

Wealth

TAX BIG

SPENDERS

ByLaurenceKotlikoff

66

ILLUSTRATION

BY

731

U.S.wealthinequalityis

astounding. Surely, wealth

should be taxed. Or should it

be? Consider Warren Buffett.

His house is modest, and he’s

not into big boats; when he dies,

he plans to give the bulk of his

money to charity.

Instead, we should tax

whattherichspend,including

thevaluetheyconsumefrom

durable goods—their mansions,

privatejets,andyachts.I’dtax

consumptionabove$100,000

peryearstartingata 5%rate,

risingto30%at$1millionor

moreannually.

Compared with some

othertaxapproaches,thisplan

is easy.There’snoneedto

accountforeverydiamondring

ora magnumofMoët.Rather,

levywhat’scalledaprogressive

cash-flow consumption tax.

Consumption is calculated as

all income—i.e., cash flow—a household takes in during the year, minus

all the money the household invests. (To capture the consumption value

that comes from durables such as houses, you’d have to figure out what

it would cost the owner to rent instead.) In economics, investment equals

saving, so the difference between income and investment tells you how

much of a person’s wealth is spent.

Electronicrecordsmakeit easytotrackcashflow.Andwith

stiffpenaltiesputinplace,wecanrequiretherichtoreporttheir

consumption abroad.

�Kotlikoff is an economics professor at Boston University

A PARTIAL PRE-TRUMP HISTORY OF THE PLAZA: 1907: The hotel, hailed as the most opulent and expensive

in New York, opens. 1920: The Plaza is renowned for its Jazz Age parties. F. Scott Fitzgerald jumps fully clothed into the Pulitzer Fountain. 1930: Ruined in the Great Depression,