This week, global elites will jet into Davos. The World Economic Forum slogan is to “improve the state of the world” but there’s an elephant in the room – one they choose to ignore every year.
We need higher rates of taxation on the wealthiest if we’re to tackle the inequality crisis that is tearing our societies apart and protect people struggling to feed their families from rising prices..
It’s 10 years since Oxfam started measuring the wealth gap between the richest and the poorest. Extreme wealth has been rising for some time, but, for the first time in a quarter of a century, extreme poverty is also on the increase.
Tonight, about one in 10 people around the world will go to bed hungry. The World Bank has warned that we can now expect to live through the largest increase in global inequality since World War II.
But this isn’t inevitable; it’s about political choices. During the COVID-19 pandemic the world’s billionaires gained more wealth than the previous 14 years put together.
This wasn’t because rich people were working harder, became cleverer or were more entrepreneurial. It was a by-product of the actions governments took to protect their economies.
Today’s rising food and energy prices are widening the gap between the richest and the rest, benefiting already wealthy shareholders while making life much tougher for the majority. Governments have a choice – do they allow this to happen unchecked or do they act?
Billionaires’ fortunes may have fallen slightly since their peak in 2021 – or in Elon Musk’s case by record-breaking amounts – but, as a group, they remain trillions of dollars richer than before the pandemic. Since 2020, almost two thirds of all new wealth has gone to the richest one per cent, while taxation of the richest has fallen to its lowest level in decades.
Many of today’s billionaires are paying tax rates in the low single digits and half of them are living in countries with no inheritance tax, ensuring that unequal opportunities will be entrenched across generations.
Around the world, public finances are stretched to breaking point, severely limiting governments’ ability to cushion the blow for people facing a cost-of-living crisis. It’s a status quo that even the most diehard supporter of the current economic system would surely struggle to justify.
Fortunately, there is a solution to hand.
The amounts that could be raised from higher wealth taxes are truly spectacular. A wealth tax of just two percent on the world’s millionaires, three percent on those with wealth above $50m and five percent on the world’s billionaires could raise $1.7 trillion dollars annually.
That’s enough to kick-start serious change: to restore public finances, curb skyrocketing inequality, create funds for tackling climate change and lift two billion people out of poverty.
Of course, wealth taxes of this kind would require global co-operation.
Just last year, rich countries agreed a global minimum effective corporate tax rate of 15 percent for large multi-national enterprises.
They should extend this to cover high-net worth individuals, ban anonymous shell companies used by the rich to hide their wealth and invest in better global tracking of who actually owns assets.
And the time is now, not only because of the scale of need – the parlous state of public finances and the devastating hardship caused by rapidly rising poverty levels – but because the public demand it.
Polling consistently finds that most people support raising taxes on the richest. In the UK, a poll by Patriotic Millionaires found that 70 percent of people are in favour.
If the wholesale rejection, including by the rich themselves, of Liz Truss’s proposed tax cuts for the wealthiest, taught us anything, it’s that the time is now to push for a different approach.
This week, more than 200 millionaires are signing an open letter calling for just that. In fact, some will even be protesting in Davos. Maybe this will be the year that global elites finally acknowledge the elephant in the room and wealth taxes become a reality.