Should the rich pay more taxes? The idea of taxing the rich at much higher rates has recently entered the political and media sphere. There is an debate across the world about how big the tax contribution of the wealthy should be and whether it should be increased. And more importantly, there is a whole new generation of politicians, economists and journalists that think that we need a massive transformation of our economy to deal with inequality and social unrest.
Taxes!: Should the Rich Pay More?
What is tax?
A tax is a compulsory transfer of resources from the private sector to government in order to fund various public payments. Most countries have a tax system to pay for national needs like education, healthcare, pensions, unemployment or welfare benefits. Taxes are a vital element of a fair society because they address problems of inequality and therefore improve social cohesion. In a way, we can say that taxation is the price we pay for a civilised society.
Rich and poor
Recent data from the investment bank Credit Suisse reveals that forty-two people now own the same amount of wealth as the poorest half of humanity. According to the charitable organisation Oxfam, the number of billionaires has nearly doubled since the financial crisis. These and many other statistics confirm that the gap between rich and poor has reached alarming extremes. With this in mind, you could conclude that instead of an economy that works for the prosperity of all, we now have an economy that benefits a tiny percentage of very rich people.
Hiding money
A global spider’s web of tax havens and the secretive industry of tax avoidance built around it enables the world’s richest individuals to hide around $7.6 trillion from society. They act technically within the boundaries of the law, although complex and expensive structures help them take advantage of legal loopholes. Many people, naturally, find this both unjust and unethical. With states unable to collect the revenue that is being lost through offshore tax avoidance schemes, governments are deprived of the money they need to fund public services, promote human rights and diminish inequality, and this also undermines public confidence in the fairness of the tax system.
Should the rich pay more?
Rutger Bregman is a Dutch historian and journalist who studies poverty and global inequality. The author of the bestseller Utopia for Realists, he talked about taxes, and tax avoidance in particular, at the World Economic Forum in Davos, Switzerland. Davos is where the world’s richest and most influential people gather to discuss how they think the world can be improved, yet Bregman was in no way intimidated by the setting or his audience. In fact, he got straight to the point:
Rutger Bregman (mild Dutch accent): I hear people talking the language of participation and justice and equality and transparency, but then almost no one raises the real issue of tax avoidance, right? And of the rich just not paying their fair share. I mean, it feels like I’m at a firefighters conference and no one’s allowed to speak about water. Something needs to change here. Ten years ago, the World Economic Forum asked the question, what must industry do to prevent a broad social backlash? The answer is very simple: just stop talking about philanthropy, and start talking about taxes.
Shame on you
Bregman continued by shaming billionaires over their failure to pay taxes and their role in perpetuating growing inequality:
Rutger Bregman: Just two days ago there was a billionaire in here: Michael Dell. And he asked a question like ‘Name me one country where a top marginal tax rate of 70 per cent has actually worked?’ And, you know, I’m a historian: the United States! That’s where it has actually worked, in the 1950s during [the mandate of] Republican President Eisenhower. The top marginal tax rate in the US was 91 per cent for people like Michael Dell. This is not rocket science! I mean, we can talk for a very long time about all these stupid philanthropy schemes, we can invite Bono once more! But, come on, it’s... we got to be talking about taxes.
A Sharing society
Bregman is not alone in being outspoken about tax. Recently, US congresswoman Alexandria Ocasio-Cortez told CBS’s 60 Minutes that people should start paying their fair share of taxes. Her proposition was that income above $10 million should be taxed up to 70 per cent to fund America’s most urgent priorities, including emergency measures to fight climate change.
Alexandria Ocasio-Cortez (American accent): You look at our tax rates back in the ’60s, and when you have a progressive tax rate system, your tax rate, you know, let’s say from zero to $75,000 may be 10 per cent or 15 per cent, etc. But once you get to the tippy-tops on your ten millionth dollar, sometimes you see tax rates as high as 60 or 70 percent. That doesn’t mean all $10 million are taxed at an extremely high rate. But it means that as you climb up this ladder, you should be contributing more.