Great timing, on January 22nd, while the Davos forum is taking place in Switzerland, 171 of the world’s biggest fortune published a letter in which they ask to see an increase in their taxation, reminding that around eight thousand billion are lost yearly in tax heavens (10% of the world GDP):
“In many nations, tensions caused by inequality have reached crisis levels. Low social trust and a pervasive sense of unfairness are diminishing basic social cohesion. This breakdown within nations exacerbates tensions between countries. The resulting dynamics guarantee that the global community will fail to adequately respond to the looming climate catastrophe.” (Letter Available Here.)
The idea appears then as Gabriel Zucman, an economist in Barkley’s University of California calls it: “The triumph of injustice”. Because unfortunately, the increase in incomes for the richest isn’t a pure hazard, or simply due to economic growth.
It is the consequence of certain fiscal policies, favoring the rich he explains, drastically reducing taxes for the wealthiest. In the U.S; for example, the top 1% used to own 7% of the countries wealth in the ’80s, Nowadays they own more than 20%. This wealth increase would probably make more sense if they were accompanied by a decline in overall poverty.
So are rich people too rich? Gabriel Zucman answered in Le 1:
” Since the 1980s, we are noticing a decline in fiscal regulations. in the U.S for example, popular middle classes are on average taxed 28% on their income, […] in comparison since Trump’s fiscal reform, billionaires pay an average of 23%. It’s as if we had a proportional tax, decreasing for the wealthiest. Until the 1980s, America taxed company up to 50%, personal wealth around 90%, and legacy up 80%. Taxation way heavier than anything we can find today.”
He also shares his thoughts on the letter published by the 171 billionaires;
“A few years ago, Warren Buffett (American Business magnate, CEO of Berkshire Hathaway), was complaining that his taxation level was lower than his secretary’s. But this is just the tip of the iceberg, just like several billionaires, his wealth is not coming from his salary but from several actions that he owns in different companies […] if Mr. Buffett needs money, he can simply sell a few actions; selling 40 from his own company, will generate a 12 million dollar benefit, taxed 20%. In the meantime, the company would have generated profit, which won’t be taxed. In conclusion, the taxes he is paying, according to his total wealth generated per month is insignificant. And higher taxes on income, is not going to solve the issue”
How do we solve the issue then?
“In order to solve fiscal issues, we need to develop ambitious propositions like the ones from Elizabeth Warren or Bernie Sanders, with taxation on fortune, that will tax billionaires according to their yearly income; as their wealth increases on an average of 8% a year, Sanders proposes an 8% taxation on fortunes higher than 10 billion dollars. It’s audacious but it is one way to answer this current fiscal injustice. Roosevelt considered that “no american citizen should have an income, after taxes, of more than 25.000 dollars a year,” (the equivalent of a million today). During this period, the American economy didn’t collapse, far from it actually. […] Today the focus should be on the hyper-concentration of private wealth”
Victor Hugo, in Les Miserables, summarized it pretty well; “The first Problem is to Produce wealth, the second one is to allocate it.” Because all this is not about money but equality. Because what can cause trouble in a democratic society where the wealth gap increases, is the inequality that is created by the absence of perspective for social progress for all its citizens. Taxation will not be a miraculous remedy; taxing billionaires will most likely help society, but it won’t solve the whole issue, for example, a better education system, or equity in terms of health are needed as well. Studies have shown, that there is a 10-15 year difference in life expectancy, in the U.S according to your monthly income. Troubling differences, still increasing, raising interesting questions for all of us.
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