We must  tax the rich, for the benefit of all

Dr. Trevor Hancock

17 January 2023

699 words

My recent columns on the need to reduce inequality and social injustice by, among other things, increasing taxes on the rich and introducing or expanding wealth taxes, have elicited responses from some people along the lines of ‘you advocate stealing from the rich’.

But the reality is that the rich have increasingly been taking – stealing, if you like – from the poor in recent decades. This is one of the many damaging consequences of the neoliberal ideology that has dominated political and economic thought and practice since the 1980s.

They do so in many ways. One obvious way is to keep wages low, keep work temporary and part-time, and avoid paying benefits to people, while pushing up prices, especially on necessities. Another way is to avoid paying taxes, or minimising taxes for the wealthy, which shifts more of the tax burden to middle and low-income people, while reducing government revenue and weakening the capacity to assist those in need.

A third way is to move industries to countries that have lower wages, fewer social protections and less effective occupational and environmental protection, all of which reduces costs and boosts profits. In addition, rich countries extract resources from low-income countries, while taking advantage of the same deficiencies, resulting in a transfer of benefits to the rich and environmental and social costs to the poor.

The consequences are documented in the latest Oxfam report on inequality, released this month. Titled “Survival of the Richest”, the report spells out what has been happening in painful detail.

The rich are getting richer, while the poor are getting poorer, says Oxfam. In fact “extreme wealth and extreme poverty have increased simultaneously for the first time in 25 years.” Since 2020, the top 1 percent got even more – almost two-thirds of the $63 trillion dollars in new wealth created. The rest of us – the remaining 99 percent – shared the remaining one-third, and you can be sure it was not going to the people at the bottom.

In fact, states the report, over 70 million additional people were pushed into extreme poverty in 2020, an 11% rise, while almost one-tenth of the global population was affected by hunger in 2021. The effects of the pandemic, the war in Ukraine, climate change and corporate behavior, notes Oxfam, have led to soaring food and energy prices that “deals another blow to the world’s poorest people”

Yet many food and energy companies in particular are making unacceptable windfall profits. For 95 food and energy corporations that made windfall profits in 2022, Oxfam notes, 84 percent of the $306 billion in windfall profits they made went to shareholders.

And yet, reports Oxfam, “worldwide, only four cents in every tax dollar now comes from taxes on wealth”, while rich people’s (mostly unearned) income “is taxed on average at 18 percent, just over half as much as the average top tax rate on wages and salaries.” Yet taxes used to be much higher, playing “a key role in expanding access to public services like education and healthcare”, until “governments across Africa, Asia, Europe, and the Americas . . . slashed the income tax rates on the richest.”

The way things are, as Oxfam CEO Danny Sriskandarajah states, “is an affront to basic human values.” Moreover, states Oxfam, “extreme concentrations of wealth undermine economic growth, corrupt politics and the media, corrode democracy and propel political polarization”. So, unsurprisingly, Oxfam calls for higher income taxes on the rich, higher capital gains taxes, inheritance, property, land and net wealth taxes, and taxes on windfall profits.

The benefits of just an annual wealth tax of up to 5 percent on the world’s multi-millionaires and billionaires would be massive. Among other things, the $1.7 trillion a year it would raise would be “enough to lift 2 billion people out of poverty, fully fund the shortfalls on existing humanitarian appeals, deliver a 10-year plan to end hunger, support poorer countries being ravaged by climate impacts, and deliver universal healthcare and social protection for everyone living in low- and lower middle-income countries.”

Imagine what raising taxes in all those other areas could do. What’s not to like – unless you are a billionaire or millionaire lacking any form of social conscience.

 © Trevor Hancock, 2023

thancock@uvic.ca

Dr. Trevor Hancock is a retired professor and senior scholar at the

University of Victoria’s School of Public Health and Social Policy

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