Tuesday, June 25, 2024

Blueprint shows why only real barrier to global billionaire tax is 'political will'

Jake Johnson, 
Common Dreams
June 25, 2024 

British millionaire Phil White carries protest sign "Tax the rich" outside the World Economic Forum © Fabrice COFFRINI / AFP

Renowned economist Gabriel Zucman released a blueprint Tuesday showing the world's governments that a global minimum tax on billionaires would be both technically feasible and economically beneficial, leaving political will as the only major obstacle preventing transformative changes to an international tax structure long exploited by the ultra-rich.

Zucman, an economics professor at the University of California, Berkeley and a leading expert on tax evasion, estimated in the new analysis that a 2% minimum tax on the wealth of global billionaires would raise between $200 billion and $250 billion annually in revenue from roughly 3,000 individuals globally, resources that "could be invested to support sustained economic development through investments in education, health, public infrastructure, the energy transition, and climate change mitigation."

Billionaires in countries around the world—including France and the United States—pay lower effective income tax rates than those in the working class, often making use of holding companies and other complex maneuvers to dodge their obligations and stockpile massive fortunes. The world's billionaires collectively own $14.2 trillion in wealth, according toForbes data.

Zucman argued in his blueprint— commissioned by the government of Brazilian President Luiz InĂ¡cio Lula da Silva—that structuring a new tax based on a specific percentage of billionaires' wealth would prevent ultra-rich individuals who report little to no taxable income from completely avoiding taxation. He also notes that the wealth of billionaires is easier to calculate than income flows, given that "at the top of the wealth distribution, the bulk of wealth consists of shares in companies."

"Fundamentally, this minimum tax should be seen not as a wealth tax, but as a tool to strengthen the income tax," Zucman wrote. "A billionaire who already pays the equivalent of 2% of their wealth in income tax (e.g., because that person realizes a significant amount of capital gains or earns a significant amount of dividend income directly) would have no extra tax to pay. Only billionaires who currently pay less than 2% of their wealth in tax would have to pay more."


Numerous potential challenges could arise should nations attempt to move forward with a minimum tax on billionaires, Zucman noted, including difficulties obtaining accurate estimates of rich individuals' fortunes—which are often hidden away in tax havens—and insufficient coordination between countries, as well as likely efforts by billionaires to evade the tax by shifting assets abroad.

But Zucman argues such obstacles can be overcome in the process of designing the minimum tax, which he described as the "most powerful tool to improve the effectiveness of the taxation of ultra-high-net-worth individuals because it ensures that no matter the avoidance strategies these taxpayers may use, the amount of tax effectively paid cannot fall below a certain amount."

"How to ensure an effective taxation of ultra-high-net-worth individuals if some jurisdictions decline to implement this standard? Two main policies could be implemented: first, measures to strengthen mechanisms to limit tax-driven international mobility; second, mechanisms to incentivize broad participation in the agreement," Zucman wrote. "Many countries have rules in place to limit tax-driven changes in residency of high-net-worth individuals, including exit taxes. Countries implementing the minimum tax standard could build on these rules and strengthen them."

The primary barrier to establishing a global tax on billionaires is not technical, Zucman argued, but political, particularly given the sway the ultra-rich have over economic policy.

"The goal of this blueprint is to offer a basis for political discussions—to start a conversation, not to end it," Zucman wrote. "It is for citizens to decide, through democratic deliberation and the vote, how taxation should be carried out. I hope this report will contribute to this democratic discussion."

"Thanks to recent progress in international tax cooperation, a common taxation standard for billionaires has become technically possible," he added. "Implementing it is a question of political will."

Recent statements by world leaders and survey data indicate that a global tax on billionaires is increasingly popular—even among millionaires. A YouGov poll released earlier this week found that 59% of U.S. millionaires would support a global tax on billionaires equal to 2% of their wealth, a proposal that U.S. Treasury Secretary Janet Yellen has thus far opposed.

In April, the finance ministers of Brazil, Germany, South Africa, and Spain argued in a Guardianop-ed that a minimum tax on billionaires would "boost social justice and increase trust in the effectiveness of fiscal redistribution" while also generating "much-needed revenues for governments to invest in public goods such as health, education, the environment, and infrastructure—from which everybody benefits, including those at the top of the income pyramid."

"Fighting inequality requires political commitment—a commitment to the objectives of inclusive, fair, and effective international tax cooperation," the ministers wrote. "Surely, it needs to go hand-in-hand with much broader approaches that reduce not only wealth inequality but also social and carbon inequalities. The challenges that lie ahead are huge, but we stand ready to engage in concerted multilateral action to tackle them."

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