For the first time in 25 years, we have seen extreme wealth and extreme poverty increase simultaneously. The world’s five richest men doubled their fortunes since 2020 while five billion people have been made poorer. Credit: Lova Rabary-Rakontondravony/IPS
By Amitabh Behar
NEW DELHI, Aug 6 2024 – We are living in a world of multiple crises of inequality, climate breakdown and conflict. Billions of people globally are facing huge hardship. Whole governments, too, are virtually bankrupt, with extremely high debt levels forcing them to implement brutal and deeply unpopular cuts and tax rises for ordinary people. 3.3 billion people live in countries that spend more on debt interest payments than on either education or health.
For the first time in 25 years, we have seen extreme wealth and extreme poverty increase simultaneously. The world’s five richest men doubled their fortunes since 2020 while five billion people have been made poorer. In his 2023 SDG Progress Report, the United Nations Secretary-General announced that the sustainable development goal (SDG) which tracks inequality is one of the worst performing.
Tax is one of the most important levers that a government has at its disposal to reduce economic inequality and generate revenue for governments to spend on policies that reduce inequality. Historically, taxation of the ultra-rich has helped to create more equal societies and prevent an extreme gulf from emerging between the haves and the have-nots.
Half of the world’s billionaires live in countries with no inheritance tax for direct descendants. They will pass on a $5 trillion tax-free treasure chest to their heirs – which is more than the GDP of Africa—beginning the next generation of aristocratic elites
However, in the decades prior to the pandemic, progressive taxation collapsed. The ultra-rich and corporations have been favoured with low-tax regimes, while taxes on billions of ordinary people have increased.
Billionaires are paying tax rates as little as 0.5% on their immense wealth, a fraction of that paid by teachers or nurses. Meanwhile, billionaire fortunes are rising at an annual average of 7% over the past four decades –far faster than the wealth of ordinary people.
The call for increased taxation on the ultra-rich is gaining momentum. For the first time in its history, in June, G7 leaders committed to working together to increase progressive taxation.
Under the Brazilian G20 Presidency in July, G20 Finance Ministers committed for first time ever to cooperate on taxing ultra hight net wealth individuals more effectively. Oxfam strongly supports the Brazilian G20 Presidency’s initiative to set a global standard on taxing the super-rich.
At the G20 Summit in November this year, leaders need to go further than their finance ministers and back concrete coordination: agreeing on a new global deal to tax the ultra-rich at a rate high enough to close the gap between them and the rest of us. Political leaders are waking up to this being a very popular policy; even wealthy individuals support higher taxes on themselves.
Nearly three-quarters of millionaires in G20 countries support higher taxes on wealth, and leading figures such as Abigail Disney have been vocal in their support of a global effort to tax the ultra-rich.
Greater taxation of the world’s richest individuals is not the only answer to the inequality crisis, but it is a fundamental part of it. A one-off solidarity wealth tax and windfall taxes would raise funds that can be directed to provision of public goods. It is feasible to make these progressive changes.
Italy was one of the first countries to impose a windfall tax, and after WW2 the French government taxed excessive wartime wealth at a rate of 100%. A similar level of ambition is needed today.
Further, governments should permanently increase taxes on the richest 1%, for example to at least 60% of their income from labour and capital, with higher rates for multi-millionaires and billionaires. They must especially raise taxes on capital gains, which are subject to lower tax rates than other forms of income.
Permanent taxation of wealth that rebalances the taxation of capital and labour can greatly reduce inequality, as well as tackle the disproportionate political power and the outsized carbon emissions of the super-wealthy.
We need to see the wealth of the richest 1% taxed at rates high enough to significantly reduce the numbers and wealth of the richest people and redistribute these resources.
This includes implementing inheritance, property and land taxes, as well as net wealth taxes. Half of the world’s billionaires live in countries with no inheritance tax for direct descendants. They will pass on a $5 trillion tax-free treasure chest to their heirs – which is more than the GDP of Africa—beginning the next generation of aristocratic elites.
Above all, we want to see a shift in imagination from governments. A reckoning that more of the same —more billionaire wealth, and a deeper plunge into a cost-of-survival crisis— is the definition of insanity and more suffering for billions of people. We need to heed the evidence, but also look to history, and what ordinary people are calling for around the world.
Closing tax loopholes and ensuring that the richest pay their fair share would reduce inequality and raise trillions of dollars urgently needed to stop climate breakdown and invest in fairer societies for everyone.
It would put people and planet before the needs of a rich few. The time has come for governments to shake off decades of failed ideology and rich elite influence, and to do the right thing: tax the ultra-rich.
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Amitabh Behar is Executive Director of Oxfam international