The richest 1 percent of people on Earth made almost two-thirds of the new wealth created since the pandemic began, Oxfam said in a report released Monday, the opening day of the World Economic Forum in Davos, a ski resort in the Swiss Alps. The group proposed to increase tax on billionaires’ income.
The world’s richest have absorbed a greater proportion of global wealth during the pandemic and over the past decade, while global poverty has increased for the first time in 25 years, according to the report, titled “Survival of the Richest.” It added that the planet is facing a “polycrisis” of climate change, cost-of-living burdens, widespread hunger and an unprecedented decline in human development.
Oxfam is calling on world leaders to significantly increase taxes on the ultrawealthy. This includes higher taxes on income and capital gains, which it argued are the most important source of income for the rich in most countries.
“As a starting point, the world should aim to halve the wealth and number of billionaires between now and 2030, both by increasing taxes on the top 1% and adopting other billionaire-busting policies,” the report said. “This would bring billionaire wealth and numbers back to where they were just a decade ago in 2012.”
Oxfam timed its report to the start of the World Economic Forum, a gathering of the world’s political and business elites that runs until Friday, with panels on a variety of topics scheduled, including human rights, the pandemic, climate change and ways to prepare for an expected recession.
The group called for countries to impose a tax rate of at least 60 percent on income, from both labor and capital, of the world’s richest 1 percent, as well as overall higher rates for multimillionaires and billionaires. It said even a tax of up to 5 percent on the world’s billionaires could raise about $1.7 trillion annually, enough money to lift 2 billion people out of poverty, as well as fund a global plan to end hunger.
To illustrate the current state of tax discrepancies, Oxfam provided a stark example: Elon Musk, CEO of Tesla, SpaceX and Twitter, paid a true tax rate of just over 3 percent from 2014 to 2018, while a market trader selling rice and flour in Northern Uganda paid an income tax rate of 40 percent.
“While ordinary people are making daily sacrifices on essentials like food, the super-rich have outdone even their wildest dreams,” Gabriela Bucher, executive director of Oxfam International, said in a release. “Just two years in, this decade is shaping up to be the best yet for billionaires — a roaring ’20s boom for the world’s richest.”
Daniel Bunn, president and CEO of the Tax Foundation, a U.S.-based nonprofit that focuses on the economics of tax policy, said that a 60 percent marginal tax rate on the world’s wealthiest 1 percent would be “an enforcement challenge to begin with” and could encourage avoidance or evasion. He said a broader tax base at a lower rate might be a better long-term option.
He also said that lawmakers around the world should consider a progressive consumption tax, which essentially means taxing the ultrawealthy when they spend money. He argues that it would make tax avoidance more difficult and also make personal wealth easier to track.
“You can figure out how to avoid income taxes by relocating where you are in the world. You can choose to minimalize your exposure to capital gains by holding your assets and not selling them,” he said. “But when you buy something, there is a transaction there — it’s a less mobile factor.”
“People aren’t going to avoid buying things,” he added.
According to the Oxfam report, marginal tax rates of 60 percent or above on personal income of the rich “were the norm for large parts of the 20th century.” But taxes on personal income, dividend income, inheritances and corporate income tax have generally declined since 1980 in rich countries. About half of the world’s billionaires live in countries where there are no inheritance taxes, the report stated.