As the rich wield their clout and garner a disproportionate share of the global wealth, an economist said on Tuesday minimum tax proposal for the billionaires could soon become a reality.
Paying Up Fair Share: The concentration of wealth has become a “global” and “alarming” issue, said Gabriel Zucman, Professor of Economics at the Paris School of Economics and the University of California, in an opinion piece contributed to Project Syndicate.
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Citing statistics, the economist said a mere 3,000 people now boast of $14.4 trillion of wealth, which equates to 13% of the world’s GDP. This compares to a far less 3% GDP share of their wealth made up in 1993, he added.
Zucman also highlighted “two striking similarities” seen among these ultra-rich. “The vast majority are men; and they typically pay much less tax, as a share of their income, than their employees and middle-class workers in general,” he said.
The severity of the issue has prompted the G20 to address it in a meeting held in Rio de Janeiro last month, as the final declaration called for “all taxpayers, including ultra-high-net-worth individuals, to contribute their fair share in taxes,” the economist said. “Aggressive tax avoidance or tax evasion of ultra-high-net-worth individuals can undermine the fairness of tax systems,” the grouping of the world’s biggest developed and emerging nations said in the declaration, he added.
Putting forth his argument that why the wealthiest should pay their fair share of taxes, Zucman said without sufficient tax revenues, governments would be handicapped to guarantee adequate services such as education, health care, and social protection, nor can they respond to much larger problems like the climate crisis.
The economist noted the results from an Ipsos poll in G20 countries, which showed an overwhelming 67% of people agree that there is too much economic inequality, and 70% support the principle that wealthy people should pay higher income-tax rates.
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Minimum Tax On Agenda: While the Rio declaration signaled a significant shift of recognizing that the ultra-rich need to pay their fair share of tax, there was no political consensus on the 2% minimum tax on billionaires and it was not part of the final text, Zucman said. “The declaration had to be approved unanimously, and some countries still have reservations about some aspects of the proposal,” he said.
The economist, however, thinks “there is no going back.” “The minimum tax is now on the agenda, and looking at the history of international tax negotiations, there are concrete reasons to be optimistic about the proposal's future,” he said. He noted that in 2013, the G20 acknowledged the need to rein in rampant tax avoidance by multinational companies and in Oct. 2021, 136 countries and territories adopted a 15% 15% minimum corporate tax.
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Not all countries need to adopt a 2% minimum billionaires’ tax, “we simply need a critical mass of countries to agree on a set of rules to identify and value the wealth of the ultra-rich and to adopt instruments to impose effective taxation regardless of the billionaires' tax residency,” Zucman said.
“This way, we can avoid a scenario where the ultra-rich flee to fiscal havens, thus ending the race to the bottom among countries competing to offer billionaires the lowest tax rate.”
Why It’s Important: The billionaires’ tax proposal was mooted in the U.S. by President Joe Biden’s administration in line with the Democratic party’s agenda of identifying additional sources of financing to fund government spending. But it has been met with opposition from some of the richest.
In a March 2023 post on X, formerly Twitter, Biden said the billionaires pay an average of 3% taxes. “Look, I think you should be able to be a billionaire if you can earn it, but just pay your fair share. I think you ought to pay a minimum tax of 25%,” he said.
See Also: How do billionaires pay less in income tax than you? Tax deferring is their number one strategy.
Zucman said in a New York Times op-ed earlier this year said billionaires like Amazon’s Jeff Bezos and Tesla’s Elon Musk pay the least taxes relative to the amount of money they make because they live off their wealth, unlike the common man who lives off salaries.
If Amazon were to give its profits to shareholders as dividends, which are subject to income tax, Bezos would have to foot a hefty tax bill, he said.
“Unless Mr. Bezos, Warren Buffett or Elon Musk sell their stock, their taxable income is relatively minuscule. But they can still make eye-popping purchases by borrowing against their assets,” he said.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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