The rich want to be taxed more. An open “millionaire’s letter” signed by 83 super-rich individuals calls on governments around the world to introduce “immediate, substantial and permanent” higher taxes on “people like us” as a way to pay for the coronavirus recovery. Similar letters have appeared in the past, including one in January 2020 signed by 120 billionaires and millionaires demanding higher taxes. Two of the world’s richest men, Warren Buffett and Bill Gates, have joined the growing call for the rich to pay more tax. Are they right?

The world is facing an unprecedented economic crisis. The IMF predicts the worst global economic shock of our lifetimes will be “unlike anything the world has seen before”. The crisis could deepen and entrench existing inequalities. The debt burden on governments will be comparable to “war debt” and will likely need to be paid off over multiple generations.

Given all this, should the richest pay higher taxes? In the US in 2018, for the first time on record, the richest households paid a lower tax rate than almost anybody else in the country. In response, during her presidential run, Elizabeth Warren called for an “ultra-millionaire tax” on the richest individuals in the US. Yet, at the same time, many European countries have been abandoning so-called “wealth taxes” (in the 1990s, a dozen European countries implemented wealth taxes, today just three do). What’s going on?

What do our readers think? We had a comment from Markus, who argues that many people we consider wealthy are actually “asset rich but cash poor”, and that “wealth taxes might potentially bankrupt them and destroy their companies with all the jobs they create”. Is he right?

To get a response, we put Markus’ comment to Chiara Putaturo, EU Inequality and Tax Policy Advisor at Oxfam International’s European Union office. Is Markus right?

Without going into too much technical detail, when we are talking about taxing the rich more, we are talking about taxing wealth. And, actually, wealth can include a lot of things. So, not only cash but also, for instance, cars, the value of property, inheritance, and capital gains. So, even if a person is poor in cash, there are a lot of other wealth items that can be taxed.

It’s true that it’s sometimes difficult to identify them, because there is also an issue of transparency of this wealth and also an issue of transferring wealth offshore and abroad, So, we need transparency and cooperation among countries.

For another perspective, we put the same comment to Martin Ågerup, President of the Danish free market think-tank CEPOS. What would he say?

Well, I think Markus has a very important point here. A lot of people with wealth – when you read about how wealthy they are – it’s based on an assessment of what the market value of their company is. It’s a bit like saying: if you own a house that’s worth 200,000 US dollars you have 200,000 dollars. You don’t. You could sell the house, and then you would have the money, or you could borrow money using the house as collateral, but then you would have to pay interest on that debt and there’s a risk of you losing the house.

That’s the same for somebody owning a company. If you have to go out to borrow money to pay a wealth tax, then slowly you’re losing the control over your company. And that has implications, because that would mean if we create wealth taxes or inheritance taxes that have that result then the people who have been successful building businesses would slowly lose control over the businesses that they’ve been running successfully.

So, we need to be aware of that. Wealth taxation is, generally speaking, not a good kind of tax. It’s better to tax income. Capital is problematic to tax, because capital gains is something you create from investment, and we want more investment; we want private individuals, entrepreneurs, investors from within the country or coming from the outside to create new businesses, jobs, innovation, and productivity growth, and we don’t do that when taxing capital. We should avoid that.

Next up, we had a comment from Peter, who argues: “All multinationals should be forced to pay more tax. For decades there has been a race to the bottom concerning taxes for big companies. And the results are clear: less investment in infrastructure, less money for social security and more taxes for citizens.” Is he right?

How would Chiara Putaturo from Oxfam International respond?

Peter is perfectly right. He also understands the reason why Oxfam works on tax justice. Because when we have corporations and rich individuals that avoid paying their fair share of taxes, countries cannot afford to pay for public services such as education, health and social protection that have been so important during this crisis. So, this is the first reason why we work on tax justice.

Peter is also right in identifying the problem of tax avoidance by corporations. In particular, there are a lot of tax loopholes concerning digital companies – let’s think about Amazon or Microsoft. We don’t have a tax system that can tax them in a fair way, and so they have been able to pay really low taxes until now, and we have seen during [the pandemic] that they have been making even greater profits than before. So, it’s really an issue of fairness and justice to ask for greater contributions from them.

Finally, how would Danish economist Martin Ågerup respond?

No, I disagree with Peter here. If you have a market with competition (which is what we should be striving for always, not to have private or public monopolies) then the taxes that corporations pay, in the end, aren’t actually paid by the corporations.

When you have higher corporate taxes, you have less investment in the economy. Lower investment results in lower productivity growth, and therefore lower growth in wages. So, in the end, it’s actually employees who pay the corporate taxes, not the corporations. A thing can’t pay taxes, it’s always people who pay taxes. If we have a ‘petrol tax’, it’s not paid by petrol but by the people using petrol. It’s the same with corporate taxes, which aren’t paid by corporations but by either the owners of the corporations or the employees, and typically it will be the employees.

In my opinion, corporate taxes should be abolished altogether. So, I think it’s good we have tax competition that’s pushing down corporate taxes, because it’s a bad type of taxation. In the end, corporate taxes are a very small proportion of the total tax revenue in most countries. The contribution that corporations bring in terms of public revenue come from the taxes that the employees of the corporations pay through the jobs that they have because of the existence of the corporation and the investment that the corporation has made.

Do the rich pay too little tax? Or are wealthy individuals “job creators”? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!

IMAGE CREDITS: Photo by Tony Pham on Unsplash


38 comments Post a commentcomment

What do YOU think?

  1. avatar
    Catherine Benning

    Do the rich pay too little tax?

    One can assume that as they have been out and about a bit, they fully understand the need for balanced books of necessary finance to keep themselves in business. So does any thriving economy and the infrastructure it has to have to survive.

    They must realise, like the rest of us, that we have become a down market underclass of unhygienic imbeciles as they too see the filth and pot holes in the streets. They also see the Health service barely able to sustain itself with the mass migration the size of another planet full of people expecting our own tax payers to also keep them looked after, even though they don’t want to pay for it. And the rich are the people who have brought this about and benefitted from it. And they know it. They being brighter than most. in this field.

    They also know the mess is not only affecting those in their families, who are not in the position of independence from using our system, in the same way the rest of us have to depend on it. They also know in cases like this corona virus and accident and emergency situations they also have to use the failing health care on offer, otherwise they too die. So, smartly, they are asking governments to save them and their own from the derelict situation brought about by non funding.

    Here is a tip for them. Stop backing globalism, it cannot work, no matter how much money you think you can coin in via the masses. They will simply break your bank as well as ours with it. Return production to the West, it is cheaper in the long run and provides better. Deferred gratification always applies, immediate pay offs do not. Yes, pay the substantial tax you used to, you will miss nothing as well as gain your self respect once again. We need you to keep this wonderful civilisation in tact. If you don’t you too will find you are destroyed..

    One more thing, make sure those in the position of ruler are fit for the job. Presently they are not. And you know that as well.

  2. avatar
    Boris

    No they don’t. Actually, they pay much more than average people do. Talking about the percentage of the tax, this doesn’t look right if laws are not equal for different people. Equality means that you can’t require more from poor people than from rich people, neither you can require more from reach than from poor. Otherwise it is not about equality any more.

    • avatar
      Catherine Benning

      @ Boris

      They do not pay more at all. They pay zero. Except to accountants who play the get out game for them. Tax write offs are massive, complicated and hard to fathom. Don’t believe it, take a look at Amazon.

      https://www.youtube.com/watch?v=qNg55JDMDHM

      It is naive to believe there is such a thing as equality. Neither should there be. If you believe there should be give a reason. There is none. That is an absurd statement. And usually given out by oily politicians so the masses fall for their line of, we are sorry, we did not know it was happening. When of course they knew full well what was happening. They set it up that way.

      They also imported inequality it into our continent fully aware of how the masses they encouraged to invade our culture lived and preyed on women and children. Will any one of those politicians face accusation and charges for bringing such action against our people? Of course not, for, they are sorry, they didn’t know what was going on. Do you raise a voice to condemn this ‘inequality’ under the law, or, even inequality of attitude? No… I wonder why? Could it be you don’t, after all believe in equality for the masses?

      People are not born equal. What you mean is equality under the law. Well there is no equality there either. An example would be the bunch of foreign born old men in Rochdale, grooming, abusing and raping pale children and young women for years, whilst the police and social services, including government officials, stayed quiet as they ‘feared’ that old chestnut called rac. im accusations. Which also was an untruth. More than likely there was a pay off of some kind that kept the mouths shut.

      And compare that with todays Epstein and Maxwell story. A British Prince also in the mix there. However, the Rochdale young girls were babies, these newer females were much older. In fact, at the time, in the main they were with consent, of an age considered legal. One group were immigrants from the third world, just as those trading the bodies of the present, are indigenous and of a much paler order. See any equality with their treatment?

      The immigrant brigade still at it today all living alive and well. The other found dead in his cell. Then, we wake up to this same immigrant crowd presently in the business of slave trading, right in our cities and towns with sweat shop labour. The estimate being a possibility of 10,000 of these women, who are third world imports, who cannot speak the language used for pittance wages. The pretence being, it was unknown by authorities. The entire city of Leicester knew about it for decades but not the local Bobby.

      The point I am making here is, these crimes were well known about for years in both severity and extent. The women used left to rot. Yet, the law remains easy going on those who come to the West to abuse its civility and make a fortune from it in these subversive ways. In other words, the law turns a blind eye to men who have no conscience. Women receive no compensation from these individuals and the same beasts using them are not sent back where they belong, having a mentality that suits those parts of the planet they originated. FGM is another inequality toward women. Likewise, thousands of women abused in this way and the European tax payer having to pick up the very expensive bill for their treatment in Western hospitals. And to add injury to injustice, these same people now want us to pay them compensation for a history few have any knowledge of. After ‘they’ have the gall to come here and continue with their abusive lives, right in our midst, costing us a fortune.

      Worse, those in power that imported this low life group of ignorant movers and shakers, left to play the same game another day. The paler skins either dead in a prison cell or relentlessly kept in locked up, without a world of what is happening to them. No charges, no court hearing, no release, just tortured and not a word from the masses to have them freed or even give justice. That is not equality under any law. Fully known about by all but carefully forgotten whilst in full view.

      So, don’t be silly. There is no such thing as equality. Not on any level.Never was and unlikely ever will be.

  3. avatar
    Børge

    No, I don’t agree. Billionaires can be more supportive in other ways rather than just counting their money and perhaps blackmailing others by making a kind of spending strike.
    In fact, it doesn’t make sense to me when billionairs demand higher taxes to help paying recovery of their own activities.

  4. avatar
    Michał

    As a percentage of their income, they still pay far less. And I’d have to know more about the details of this “covid recovery”, because in America, we just witnessed the largest-ever transfer of wealth ever to the financial class, in the name of “covid recovery”.

    • avatar
      Sergio

      Are you kidding? They pay more both in absolute terms and as a percentage. Usually in the lower brackets the rate is 10 to 20%. In the upper band they can be 40 to 50%. The higher the income the more you pay.

    • avatar
      Michał

      No, I’m not kidding. If what you said were true, rich people would be jumping on the opportunity to have a flat tax.

    • avatar
      Michał

      Not to mention all of the financial instruments that rich people can make use of, like “charitable donations” (I believe that’s what pays for debating Europe), offshore tax havens, trusts, inheritance, the art market… and that’s far from an exhaustive list. For normal people, all income is taxable income, for rich people, most of it isn’t.

    • avatar
      Mariusz

      it’s a vicious cycle, the way I see it. Central Banks are “printing” money (since March Bank of England has “printed” £1.3 trillion!), most of that money ends up in the hands of those who already have a lot, and then they “bury it in the forest” using methods mentioned by you, avoid tax, and when all the money has been “buried”, BoE “prints” more money and the cycle repeats. Wealth is being created but only for a very small percentage of people, when the rest of us haven’t seen a real pay rise in decades and we’re being denied public services due to tax avoidance and wealth concentration at the top.
      It’s crazy!

  5. avatar
    Erjon

    “They’re still rich, so…yes”

    • avatar
      Panayiotis

      wow

    • avatar
      Erjon

      do i need to add that i was being sarcastic?

    • avatar
      Panayiotis

      no, my bad. Sorry for being prejudiced.

    • avatar
      Riccardo

      this but unironically

  6. avatar
    Gabor

    I think this is another inappropriate question. The more important question is to ask why this system creates such differences in the wellbeing of people and how can we make sure that is someone earns some extra, then that is coming from a valid source, not from some sort of illegal activities. Like for example how is it possible that we have something called off-shores right in the middle of Europe? We allow criminals store billions in the banking system and then create a populistic illusion that we care about the social aspect by barely touching the tip of the iceberg? Please start looking in to the root of the issues.

  7. avatar
    Elisavet

    Why did they ask to be taxed, instead of just donating then?

  8. avatar
    Pedro

    Really? Of course they want to avoid taxes, this is just PR. They say to the press they want to be taxed more while they continue lobbying on the backstage to be taxed less. 2020 and people still believe billionaires are good guys.

  9. avatar
    Catherine Benning

    @Michał

    The question is with reference to Europe not the US….. However, the US banking system does affect the entire banking system world wide.

    Yes, it is an accountancy fiddle with get out clauses, etc. But, the way it was funded previously at between 70% to 95% was the way the West enabled itself to run the economy to the benefit of all. Including the rich. They did this along with tax paid from the ordinary guy, as they had jobs that are now non existent. Hence less money for the Inland Revenue pocket today.

    Corporate tax is another swindle. Of course those in the top drawer tell government stooges, they get more off them in the long run, as the amount given ends up somehow higher, as they hang on to less. LOL. Nice if you can get away that bull.

    Taxes: The US facts. The fun they had with the tax rates under Roosevelt.

    https://www.youtube.com/watch?v=d3T4Hz3B644
    Here is a little information on financial inequality over the decades.

    Education Education Education

    https://www.youtube.com/watch?v=a7V8a_XC1MIhttps://www.youtube.com/watch?v=N2EkxAQjpw0

    And the UK was even worse for the tax payer. Or, is that an ill conceived message?

    https://www.youtube.com/watch?v=d3T4Hz3B644

    During the 1950s and 1960s, income tax in the UK was at its highest levels reaching a 90% rate. In 1965 a separate Corporation Tax was established for businesses. When Margaret Thatcher came to power in 1979 the income tax top-rate was 83% whilst the basic rate was 33%

  10. avatar
    Oraianthi

    Do the rich pay any tax? Like at all? Not even talking of percentages guys. Billionaires pay less tax than you and me average Joes

  11. avatar
    Ana

    Yes and as some of them just declared!

  12. avatar
    Riccardo

    If they’re rich, they pay too little. If they pay enough, they’re not rich.

  13. avatar
    John

    Shouldn’t we just eat them and redistribute their wealth?

    • avatar
      Riccardo

      hell yeah

  14. avatar
    Róbert

    No. Martin Ågerup is right, we should’t punish success. I don’t care about inequality because the capitalist economy is not a fixed pie. Wealth comes from massive value creation not from unfair redistribution. No nation can tax itself into prosperity.

    • avatar
      Riccardo

      creating infinite wealth from a finite system. Only a madman or an economist could believe such a paradox.

    • avatar
      Róbert

      We are far from attempting to create infinite wealth. As about the finite system, I won’t try to solve tomorrows problems with today’s technology. Makes no sense to do that. But also because any asset or commodity has a price, which depends on its scarcity and the market’s demand. That’s why I don’t think resources will ever deplete. Because a scarce commodity’s price will crush its demand, long before depletion.

  15. avatar
    Peter

    They are afraid of the aftermath

  16. avatar
    Cãlin

    In my opinion (and also in the opinion of the greatest minds of the world) increasing the taxation on big incomes, on rich people let’s say, might lead to a undesired effect, the reduction of interest in performant businesses, therefore in job creation, therefore social benefit. For this reason I suppose that we reached a certain level of knowledge in order to differentiate a business that generates more value for the society, that brings, apart from effort, innovation and progress, than speculative ones that only supply a temporary demand or a weakness of a certain system. Nevertheless, information and opportunity have to be credited too, but not on the same level. Let’s not ignore the fact that a rich state is a state with many wealthy citizens and many wealthy citizens are the well payed ones and they are well payed because of the importance of their work in terms of value on work market or productivity.

    • avatar
      Catherine Benning

      @ Cãlin

      https://www.youtube.com/watch?v=-eMs8rzBesw

      Here is one of the great minds who doesn’t think the way you do. His name is Prof: Richard Wolf. You should broaden your horizons a little bit.

  17. avatar
    Otto

    Bullshit, no-one asked all the “rich” people in the world anything recently, let alone that 83% of them answered the way you claim. From a global point of view 25% of people living in rich countries are in the global 1%, most of them don’t even feel rich.

    • avatar
      Sam

      The 83 referred to an absolute number rather than a percentage:

      An open “millionaire’s letter” signed by 83 super-rich individuals calls on governments around the world to introduce “immediate, substantial and permanent” higher taxes on “people like us” as a way to pay for the coronavirus recovery

    • avatar
      Otto

      I see. Well if it’s only 83 people it means even less.

  18. avatar
    Pedro

    Of course, and i ll explain later why

  19. avatar
    EU Reform- Proactive

    If the rich want to be taxed more, why not do them such favor and draw up an ethical international tax code & abolish all global tax havens? No exception or loopholes. Similar to the UNHR. Why not test their genuineness?

    A good example could be set by the 10 European Nations known to defend & support unethical tax practices. How else can the war against global tax avoidance be won- which is openly practiced by the wealthiest 1% with the support of many national politicians & bankers?

    https://www.investopedia.com/articles/wealth-management/121515/top-10-european-tax-havens.asp

    It is reported that tax avoidance accounts between $21 to $32 trillion globally- most of it is hidden in offshore tax havens. The leaked Panama Papers from 2016 exposed 214,488 offshore entities dating back to the 1970s. Why did nobody seriously act on these revelations yet? That is where to hit all these poor elites, tax avoiders & evaders hardest.

    https://en.wikipedia.org/wiki/Panama_Papers

    Why the sudden EU awareness? Does the EU consider to find the 750 billion euro Covid-19 bailout that way= a zero way? It is estimated that ~800 billion euros are lost annually in the EU budget.

    To discuss an increase in the tax rate for the rich on this forum is simply a disingenuous attempt- or a mere diversion tactic! The 1% hardly pay any tax anyways. Even a 100% increase on a zero taxable income remains zero! Clever these elites- eh?

    https://www.cnbc.com/2020/06/19/eu-leaders-negotiate-750-billion-euros-in-covid-19-stimulus.html

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