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A PRACTICAL PRESCRIPTION FOR TAXING OUR WORLD’S RICHEST  
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Sam Pizzigati
June 27, 2024
inequality.org
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_ A bold new proposal from the economist Gabriel Zucman is gaining
prime-time backing _

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Ever wonder why the divide between the world’s richest and everybody
else keeps getting wider? Gabriel Zucman, one of the world’s finest
young economists, has just produced a report
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riffs on one key reason: Our super rich pay next to nothing in taxes.

Just how close to nothing? This close: Over the past four decades, the
world’s “ultra-high-net-worth individuals” have seen their
fortunes increase, _after_ taking inflation into account, an average
7.5 percent per year. How much annually have these rich paid in taxes?
They’ve been paying, Zucman calculates, an effective tax rate
“equivalent to 0.3% of their wealth.”

Other analysts have over recent years been sharing variations on that
same basic story. But none of those analysts have ever had the
opportunity to share that story on a grander stage than Zucman, the
founding director of the EU Tax Observatory and an economist based at
the University of California Berkeley.

Zucman prepared his landmark new report at the express request of
Brazil, the nation that currently holds the presidency of the G20, the
global grouping of the world’s most powerful economic nations. The
world’s super rich, Brazil’s current leadership believes, are
nowhere near paying their fair tax share.

Earlier this year, Brazil’s finance minister invited Zucman to
address the G20’s finance ministers on how best to start reversing
that state of affairs. This past February, Zucman did just that,
making an impressive case for a global minimum tax on billionaires.
Brazil subsequently asked Zucman to prepare a report on that notion
for the upcoming end-of-July G20 finance ministers meeting in Rio de
Janeiro.

Zucman has now officially delivered that report, and his study is
already making headlines
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Gabriel Zucman, February 2024.

How could a global minimum on billionaires actually work when no
international body has the authority to impose taxes on individuals?
No international body, Zucman notes, has the authority to tax
multinational corporations either. But the world now has what amounts
to a 15 percent minimum tax on corporate profits that over 130 nations
and territories are enforcing on a coordinated basis.

That same cooperative approach, Zucman contends, could bring the world
an effective minimum tax on billionaires. This minimum tax, Zucman
proposes, would kick in when billionaires aren’t paying in annual
taxes a sum equal to 2 percent of their personal wealth.

In a world with this 2 percent global minimum, participating nations
would also remain absolutely free to tax their richest at levels much
higher than the minimum. Indeed, Zucman’s report points out, the
existence of a global _minimum_ tax on billionaires would encourage
nations to put in place _higher_ tax rates on our world’s
wealthiest. In a minimum tax world, billionaires would have less
opportunity — and incentive —  to engage in tax avoidance.

A 2 percent global billionaire tax minimum would raise, Zucman
calculates, as much as $250 billion a year from a mere 3,000
individuals worldwide. Extending this tax to centi-millionaires —
deep pockets worth at least $100 million — would add another $140
billion annually. Raising the global billionaire minimum tax rate to 3
percent could raise the annual take to as much as $688 billion.

A massive infusion of new tax revenue along these lines would
significantly bolster our world’s capacity to address the continuing
challenges of poverty and climate change. That same revenue would
significantly enhance the political health of our world’s
democracies as well.

Progressive taxes, Zucman’s report stresses, remain “a key pillar
of democratic societies.” Having tax systems that recognize that the
rich have the wherewithal to pay taxes at a higher rate than people of
limited means “strengthens social cohesion and trust in governments
to work for the common good.”

Modern societies have typically aimed to do that strengthening via
income taxes. But income taxes have had little success collecting
appreciable revenue from our ultra-rich, Zucman relates, mainly
because “ultra-high-net-worth individuals derive their income not
from the wages they earn, but from the wealth they own — more
precisely, in most cases from the businesses they own.”

These rich can use the corporations they control to end run their
personal income taxes. One example: The less their companies shell out
in dividends, the higher their corporate share price rises. And by not
selling their own personal shares, the rich can sidestep capital gains
taxes. Some of our planet’s largest publicly traded corporations —
think corporate giants that range from Amazon and Tesla to Alphabet
and Meta — pay only token dividends if they pay dividends at all.

These sorts of tax-avoiding maneuvers have enabled our world’s
richest 0.0001 percent — our billionaire class — to _more than
quadruple_ their wealth as a fraction of global gross domestic
product since the 1980s. This enormous addition to the wealth of our
richest has for the most part totally escaped taxation.

Under the global 2 percent minimum tax that Zucman is advancing, that
picture would change. All billionaires would find themselves facing
this minimum tax if the “individual income taxes, wealth taxes, and
economically equivalent levies” they pay add up to less than 2
percent of their overall wealth.

Could billionaires weasel their way out of paying this global minimum
tax? Could they hide significant pieces of their personal fortunes?
Not likely. The market value of each billionaire’s assets would take
no great sleuthing to establish since the bulk of billionaire wealth
comes from the value of the corporate shares of stock they hold, a
matter of public record.

And most nations, Zucman adds, have also developed methods to value
other sources of billionaire wealth because they’re already levying
either inheritance or estate taxes.

Zucman’s minimum billionaire tax would let each participating nation
determine how to make its billionaires meet the 2 percent minimum tax
standard. Nations could, for instance, define unrealized capital gains
as income, as the Biden administration has proposed, or put a wealth
tax in place. A 2 percent tax on a billionaire’s personal wealth,
Zucman points out, would “by definition” meet an international 2
percent minimum tax standard.

Nations could also simply presume that ultra-high-net-worth
individuals “earn a certain fraction of their wealth in income”
and place a tax on that presumed income.

Allowing nations flexibility in how they enforce a global billionaire
tax minimum, Zucman explains, would let each country “choose the
instrument that best fits its circumstances, its legal context, its
fiscal tradition, and its existing information reporting system.”
And this flexible approach would likely “maximize the number of
countries that could join the common standard.”

Serious obstacles to subjecting billionaires to a global minimum tax,
Zucman’s report concedes, certainly do exist, on both technical and
political levels.

“A variety of political and geopolitical factors,” he observes,
“could make it difficult to obtain truly global participation in the
proposed common standard.”

But the already existing minimum tax on multinational corporations,
now three years old, vividly illustrates how global cooperation can
overcome even the most serious of obstacles. The new corporate minimum
tax allows “participating countries to tax non-participating
countries’ undertaxed multinationals.” A coordinated global
minimum tax on billionaires could adopt that same approach.

Zucman’s proposal for a global minimum tax on the world’s super
rich, the economic ministers of Brazil and Spain stressed earlier this
month, is already gaining significant international momentum. At a
news conference in Rome, these two ministers called higher taxes on
the world’s wealthiest an absolute must in a world confronting
challenges that range from hunger and climate change to the horrific
debt burden that’s currently confronting low-income countries.

A global minimum tax on billionaires, Brazil’s Fernando
Haddad declared
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would “affect just a few thousand individuals while benefiting
billions.” Haddad went on to label a global billionaire minimum tax
“a reasonable proposal in terms of social, economic, and political
justice.”

Zucman, for his part, seems equally optimistic on his proposal’s
prospects.

“New forms of international cooperation, long deemed utopian,” as
he observes in his landmark new report, “can emerge in a relatively
short period of time.”

_SAM PIZZIGATI, AN INSTITUTE FOR POLICY STUDIES ASSOCIATE FELLOW,
CO-EDITS INEQUALITY.ORG. HIS LATEST BOOKS INCLUDE The Case for a
Maximum Wage
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Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that
Created the American Middle Class, 1900-1970
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* economic inequality
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* taxes
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* tax fairness
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* Gabriel Zucman
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