Since then, economic inequalities have only worsened, in part because of the rise of tech stocks that are hugely valuable but do not declare dividends. In 2020, six of the 10 richest Americans – Jeff Bezos, Mark Zuckerberg, Warren Buffett, Larry Page, Sergei Brin, and Elon Musk – were major shareholders of non-dividend paying companies. Together, they were worth $ 500 billion, or 0.5% of the total wealth of the United States.
Last month, a White House article, co-authored by economists at the Council of Economic Advisers and the Office of Management and Budget, estimated that the 400 richest families in the United States, whose fortunes exceeded $ 2 billion dollars, were paying federal income tax at an average rate of 8.2 percent if gains on unsold inventory are accounted for as income. The average American taxpayer paid 13.3% of their income in federal tax.
The US budget deficit, as a percentage of gross domestic product, is now at its second highest level since 1945. Poll after poll Americans say they want the rich to pay higher taxes, which would reduce the deficit and would improve equity as well. Yet Congress does not raise taxes for the rich.
Consider the blatant “deferred interest” flaw in the US tax code, which allows investment fund managers to pay less tax on fees they receive from their clients, as if those fees were capital gains rather than income. President Joe Biden has said he wants the loophole closed, but proposals for tax reform must go through the House Ways and Means Committee, chaired by Richard Neal. In 2007, Neal, a Democrat, supported an unsuccessful attempt to close the loophole. Then it started receiving big donations from the corporate sector, including $ 2.9 million for its 2020 campaign alone. Last month, the House Ways and Means Committee released its tax reform proposals. Closing the deferred interest loophole was not one of them.
The conclusion is inescapable: the United States is no longer a democracy. It is a plutocracy. But countries where money has less influence over legislation also struggle to tax the rich. The Pandora Papers, released earlier this month by the International Consortium of Investigative Journalists, show how the wealthy in more than 200 countries and territories keep their assets abroad, many to avoid taxes.
Among them was Brazil’s Finance Minister Paulo Guedes, who has the ultimate responsibility to raise the income his country needs, but who has transferred nearly $ 10 million of his own money and that of his family. to the British Virgin Islands. Andrej Babis, Prime Minister of the Czech Republic at the time of the release of the documents, said his decision to place assets in offshore accounts did not involve any wrongdoing. The electorate may have been skeptical: they subsequently lost a close election.
When leaders of the G-20, which includes the world’s major advanced and emerging economies, met in Rome over the weekend, they endorsed a deal to tax large corporations at a minimum rate of 15%. The aim was to end a “race to the bottom” that has driven corporate tax rates down as countries compete for investment. But the deal will be phased in over 10 years and includes significant exemptions. Even for companies that do not qualify for an exemption, the minimum rate of 15% is lower than what most companies based in developed countries pay.
Is there anything else the G-20 could do about tax inequity between the rich and most working people? Economists Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley have suggested a wealth tax of 0.2% per annum on the value of the shares of all publicly traded companies. Such a tax, they note, is progressive, because the rich own a lot of company shares and the poor own none. It is also difficult to avoid it, since the value of a company’s shares is public.
The opening up of the global economy over the past 30 years has lifted hundreds of millions of people out of extreme poverty, but it has also enriched multinational corporations, which have been able to shift their profits where the tax rate of companies is the lowest. The G-20 has taken a step forward to address this by agreeing to the proposed minimum rate of 15%, but that leaves intact the wealth coming from startups that aren’t making a profit but whose stock prices are skyrocketing. The G-20 countries can respond to this problem by adopting a wealth tax in the direction advocated by Saez and Zucman.
Peter Singer, professor of bioethics at Princeton University, is the founder of the non-profit organization The Life You Can Save. – Ed.
By Korea Herald (email@example.com)