The Coming Tax-the-Rich Rumble in Rio
Photo by Raphael Nogueira
For the richest among us, life on Earth can sometimes get rather boring. But worry not for our world’s deepest pockets. At least five firms worldwide, notes the swanky lifestyle Robb Report, are now racing “to deliver passengers to the stars on giant balloons attached to pressurized luxury capsules.”
Sometime next year, those passengers will be making six-hour roundtrips to the edge of space, enjoying the view from “massive windows” while munching on Michelin-starred gourmet meals. All for no more than $200,000 per posh seat.
Some of those rich high-flyers, come next year, might find themselves wishing they never had to come down. Here on terra firma, something unthinkable — for our mega-wealthy — may be starting to unfold. Our terrestrial world might actually be putting in place a global wealth tax.
This coming November, the heads of state of the world’s top economic powerhouses — the G20 nations — will have on their annual summit agenda a vision for creating what amounts to a minimum tax on the wealth of the world’s wealthiest.
That vision comes from the G20’s national finance ministers. Meeting in Rio de Janeiro, these ministers have just adopted a “declaration on international tax cooperation” that emphasizes the importance of getting “all taxpayers, including ultra-high-net-worth individuals, to contribute their fair share in taxes.”
The declaration goes on to proclaim, as a G20 “commitment,” the need “to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed.”
How much importance should we give this unprecedented G20 finance minister declaration? Mogens Lykketoft, a former Danish finance minister and UN General Assembly president, is calling the declaration “the first time” that “an international standard to tax the super-rich has been put on the G20 negotiation table.”
And that breakthrough, Lykketoft adds, could hardly be timelier. Over the past decade, as research out of the activist global charity Oxfam has pointed out, our globe’s richest 1 percenters have pocketed over $40 trillion in new wealth, about 34 times more than humanity’s entire poorest 50 percent have gained over the same period of time.
The credit for this G20 finance minister breakthrough? That all belongs to Brazil, the nation that holds this year’s G20 presidency. The Brazilian finance minister, former São Paulo mayor Fernando Haddad, brought before this year’s February meeting of the G20 finance chiefs “a proposal to tax the super-rich” that rests on research from one of the world’s top experts on our planet’s maldistributed wealth.
That expert, the EU Tax Observatory director Gabriel Zucman, presented to the G20 finance ministers the case for a global minimum tax on billionaires that would kick in whenever the world’s richest aren’t paying in annual taxes a sum equal to at least 2 percent of their personal wealth.
Zucman would subsequently deepen his case for that tax in a more detailed report — A blueprint for a coordinated minimum effective taxation standard for ultra-high-net-worth individuals — that the Brazilian G20 presidency commissioned.
Brazil’s finance minister, in the meantime, has spent the last four months working to build momentum for Zucman’s plan. At the spring meetings of the World Bank and International Monetary Fund, for instance, Brazil’s Haddad asked world leaders to show the “political courage” to embrace “innovative solutions.”
“In a world where economic activities are increasingly transnational,” Haddad urged, “we have to find new and creative ways to tax these activities” and “direct the revenues to common global endeavors such as ending hunger and poverty and fighting climate change.”
By the start of April, Haddad had the French finance minister on board with his tax-the-super-rich effort. Later that month he would join with fellow finance ministers from Germany, South Africa, and Spain to plug Zucman’s call for a minimum annual tax on billionaires equal to 2 percent of their overall wealth.
“Global billionaires pay only the equivalent of up to 0.5 percent of their wealth in personal income tax,” the four finance ministers noted in a Guardian op-ed. “It is crucial to ensure that our tax systems provide certainty, raise sufficient revenues, and treat all of our citizens fairly.”
“Such a tax reform,” the finance ministers continued, “belongs on the agenda of the G20.”
“The G20 effort to tax the super-rich led by Brazil is building momentum,” Oxfam’s Susana Ruiz would marvel late in May. “We absolutely need to tax the richest in every country ― and governments, including the US, need to recognize that international coordination will help them do so.”
The United States, unfortunately, has yet to do that recognizing. In late July, the day before the G20 finance ministers vote on Haddad’s effort, treasury secretary Janet Yellen told reporters in Rio de Janeiro that “tax policy is very difficult to coordinate globally, and we don’t see a need or really think it’s desirable to try to negotiate a global agreement on that.”
That opposition would help keep the G20 finance ministers from endorsing Zucman’s specific proposal in the tax-the-rich declaration that their July 25-26 meeting produced. But Brazil’s Haddad still considers the new finance minister declaration a “significant step forward.” As does Gabriel Zucman himself. The declaration gained the G20 finance minister approval, Zucman notes, represents a new “consensus among G20 countries that the way we tax the super-rich must be fixed.”
The G20 finance ministers have now placed that consensus before this November’s G20 heads of state summit in Rio. Former G20 heads of state — a group that includes Chile’s Michelle Bachelet, Sweden’s Stefan Lofven, and Canada’s Kim Campbell — have already released an open letter that urges those heads of state to follow the Haddad lead.
“A global deal to tax the ultra-rich,” the open letter reads, “would be a shot in the arm for multilateralism: proving that governments can come together for the common good.”
The particular shot in the arm that Brazil would like to see adopted wouldn’t by itself end the continuing concentration of the world’s wealth. To start deconcentrating the wealth of our world’s richest, Oxfam researchers estimate, a global wealth tax rate on the rich would have to run at least 8 percent annually, quadruple the 2 percent rate that Brazil is now seeking. But tax rates on the rich, history shows, can rise rather quickly.
In 1913, the year the first modern U.S. income tax went into effect, the tax rate on top-bracket income ran a mere 7 percent. Five years later, that top rate ran 77 percent.
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