(Published as “A progressive tax on all forms of wealth would reduce inequality”)
Dr. Trevor Hancock
22 March 2022
A few weeks ago, before Russia invaded Ukraine and began committing war crimes that have shocked the world (in a way that should have but, to our shame, did not shock the world when Russia did the same thing in Chechnya and Syria), I was writing about inequality and health, in the context of creating a Wellbeing society.
So even though innocent people are still being butchered by Putin and his terrorist army, I will return to this topic because the problem remains and must be addressed, both in Canada and globally.
To refresh your memory, the World Health Organization (WHO) is championing the creation of what it calls Wellbeing societies, in which equitable health is achieved within the ecological limits of the Earth. ‘Equitable health’ is not the same as equal health, but is about ensuring we all have a fair opportunity to be healthy, minimizing inequality as much as possible.
Inequality has health consequences: As the WHO Commission on the Social Determinants of Health memorably put it in 2008: “Social injustice is killing people on a grand scale”. Thus high levels of inequality are incompatible with a Wellbeing society.
But inequality does not just happen. Instead, as the World Inequality Report 2022 (WIR) noted: “Inequality is a political choice, not an inevitability.” That political choice is not only killing people on a grand scale, it is creating much social strain and mental and physical ill health through poverty, marginalisation, social exclusion and alienation, resulting in what Nobel Prize-winning economist Sir Angus Deaton calls the ‘diseases of despair’.
The WIR notes “the period from 1945 or 1950 till 1980 was a period of shrinking inequality in many parts of the world”. But at the same time, and perhaps contrary to our usual modern expectations, these were also times “of fast productivity growth and increasing prosperity, never matched since” for the countries of the West.
The report goes on to note: “The reason why that was possible had a lot to do with policy—tax rates were high, and there was an ideology that inequality needed to be kept in check, that was shared between the corporate sector, civil society and the government.”
That all changed with the advent of neoliberalism as the dominant ideology, first implemented by Margaret Thatcher in the UK and Ronald Reagan in the USA. As a consequence, the report notes, “contemporary global inequalities are close to early 20th century levels, at the peak of Western imperialism”. The result, says Deaton, a self-professed believer in social democratic capitalism who is now chairing a review of rising inequalities in the UK, is that “I think that today’s inequalities are signs that democratic capitalism is under threat”
To address this, as the 2008 WHO Commission put it in one of its three key recommendations, we have to “tackle the inequitable distribution of power, money, and resources”. Thirteen years later, the WIR made much the same point: “addressing the challenges of the 21st century is not feasible without significant redistribution of income and wealth inequalities.”
So how should that be done? The World Inequality Lab, source of the WIR, has what is really a very simple proposition: “a modest progressive wealth tax on global multimillionaires.” They point out that wealth – or at least, one form of it, namely property – is already taxed pretty much all over the world. But they point out it is a flat tax, not progressive – the very rich pay the same rate on their property as the average citizen. Moreover, much of the wealth of the very wealthy is in stocks and bonds and other forms of wealth, not property.
So their recommendation is to expand the property tax to encompass all forms of wealth, not just real estate, and to make it progressive. Such a tax, they find, ranging progressively from 0.6 percent to 3.2 percent of total wealth, would generate $1.74 trillion each year, or 1.6 percent of total global incomes, that could then be “reinvested in education, health and the ecological transition”.
As they note, “it would be completely unreasonable not to ask more of top wealth-holders in the future, especially in light of the social, developmental and environmental challenges ahead.”
© Trevor Hancock, 2022
Dr. Trevor Hancock is a retired professor and senior scholar at the University of Victoria’s School of Public Health and Social Policy