This reflection article delves into the crucial findings presented in the recent Oxfam report. It explores the urgent need for government action to combat inequality, the power of progressive taxation as a tool for change, the impact of such taxation on society, public opinion, government response, and Oxfam’s proposal for transformative measures. By examining these key aspects, GRIP aims to contribute to the ongoing discourse on inequality and foster awareness for effective policy interventions.
Alarming Wealth Disparities
In recent years, the issue of inequality has reached alarming levels, posing a significant threat to society globally. Astonishingly, billionaires have seen their wealth double in the past decade, while the bottom 50 per cent experienced only marginal gains. The COVID-19 pandemic and subsequent reductions in welfare benefits have exacerbated this divide, with billionaires raking in an astounding $2.7 billion per day between February 2020 and 2021, compared with just one dollar for every 90 cents taken away from those below them during this period. This relentless accumulation of wealth has led to the wealthiest 1 per cent now holding a staggering 45.6 per cent of global wealth, while corporate profits further fuel inequality, with $306 billion in windfall profits primarily benefitting shareholders.
Urgent Government Action Required
This growing crisis demands urgent action from governments worldwide to bridge the ever-widening gap between the rich and the poor. The combined impact of the pandemic and food/energy crises has pushed over 70 million people into extreme poverty, disproportionately affecting women workers who often find themselves in low-paying, insecure positions. Moreover, rising costs of living due to inflation have exacerbated the situation, burdening individuals and nations struggling to recover economically. Governments must prioritise public spending to tackle pressing issues such as hunger, climate change, and more, rather than resorting to austerity measures that primarily harm vulnerable populations, particularly women and minorities who are denied a liveable wage.
The Power of Progressive Taxation
Taxation has historically been a powerful tool in reducing economic inequality, but in recent decades, marginal tax rates for the wealthiest individuals have plummeted, while ordinary citizens have shouldered an increasing burden through regressive measures such as value-added tax (VAT). Tax havens have facilitated this race to the bottom, enabling the wealthy and corporations to evade their fair share of taxation. Additionally, income avoidance strategies like ‘buy, borrow, die’ and utilising stocks for collateral have allowed the rich to exploit loopholes in the system. It is crucial to shift the focus towards taxing the wealthy to prevent the widening wealth gaps that are being perpetuated through inheritance exemptions prevalent in many parts of the world.
Impact of Progressive Taxation
Imposing higher taxes on the rich is key to reducing economic inequality and poverty. Progressive taxation directly impacts this by redistributing wealth from the top echelons of society, encouraging companies to invest in better labour conditions and green technologies through high dividend taxes. Effective wealth tax regimes can curtail aristocratic inheritance, while efforts to deconcentrate the monopoly power held by wealthy individuals or organisations also play a crucial role. It is imperative to address ongoing social inequalities perpetuated by minimal or no taxation on income/wealth, coupled with reduced spending that disproportionately disadvantages poor individuals, women, and racialised groups.
Additionally, taxing profits earned by billionaires, who have disproportionately benefited from ventures contributing to climate breakdown can enable countries to address global humanitarian crises while stabilising their own economies amidst cost-of-living challenges. Transparent utilisation of these recovered funds is essential, along with improved communication regarding budget allocations that prioritise gender equity and engage citizens to collectively work towards these goals.
Public Opinion and Government Response
Public opinion consistently favours increased taxation on the wealthy and opposes regressive tax measures, despite the stronghold of billionaire media moguls controlling significant shares of news outlets that are shaping and influencing public opinion. Economic establishments are shifting their stance towards higher taxes on corporations and individuals to combat inequality, with the IMF even cautioning against tax cuts that could exacerbate the problem. Encouragingly, some governments have taken steps to reverse promises of tax rate reductions for big businesses and have successfully implemented reforms like net wealth/income taxes or windfall profit taxes. Examples from Argentina, Bolivia, Spain, Sri Lanka, Chile, Colombia, Kenya, Canada, China, the Netherlands, Malaysia, and others demonstrate the effectiveness of these measures, marking a departure from the failed ideology of trickle-down economics.
Oxfam’s Proposal for Change
The Oxfam report proposes that governments worldwide must take decisive actions to increase taxation on their wealthiest citizens. Measures such as raising tax rates on personal income and capital gains, implementing steeply progressive inheritance taxes, introducing property taxes and imposing one-off or recurring taxes on unrealised capital gains can significantly reduce economic inequality and generate much-needed revenue for public funding. These steps aim to bring billionaire wealth levels back to where they were a decade ago, with the ambitious goal of halving both the wealth and the number of billionaires between now and 2030 through robust tax policies and other impactful strategies.
Jeff Bezos (Executive Chairman of Amazon) paying a ‘true tax rate’ of less than 1 per cent due to the non-taxation of unrealised capital gains highlights the urgency for progressive taxation on wealth holdings. Property taxes, inheritance taxes, and net wealth taxes present significant revenue-raising opportunities. To unlock this potential, governments worldwide must establish public registries with beneficial ownership information, prohibit anonymous shell companies, create global asset registers, and enhance the efficient exchange of information among countries while bolstering their respective revenue administration capacities.
In conclusion, Oxfam identified a bold and crucial step that governments can take to address inequality and foster investment in a fairer, more sustainable future for all: increasing taxation on the wealthiest individuals. To achieve this objective, Oxfam calls upon governments to:
- introduce one-off solidarity wealth taxes,
- permanently increase taxes on the top 1 per cent,
- apply high net worth taxes to combat inequality,
- empower public administrations with effective tools for income tracking, and
- break free from political capture by ensuring marginalised groups have representation in policy-making processes.
Furthermore, donors should support countries that promote progressive tax systems without attaching regressive reforms as conditions for aid assistance.